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Mortgage Advisor & Director
What is a mortgage valuation survey?
During the process of applying for a mortgage, your lender will want to make sure that the house your buying is actually worth what you're planning to pay for it. To confirm the property's value, they will perform a survey, known as a valuation survey. The purpose of the valuation survey is to verify that the property is suitable security against the mortgage loan you are hoping to borrow.
How do lenders perform mortgage valuations?
There are several ways a lender may choose to value your property.
In the past, a surveyor would have visited the property. They would have performed a range of checks and compiled a report, before feeding back this information to the lender.
Nowadays, lenders tend to use sources of information online, such as previous sales price or the value of other local properties. The way the lender performs their valuation will depend on their overall risk appetite, and the type of property you are looking to buy.
For example, if you're looking to buy a non-standard construction property such as a timber-framed house, you may find an in-person valuation survey is a mandatory requirement. In-person surveys may also be performed if the lender cannot find suitable information online.
What do mortgage valuations mean?
The valuation surveyor will give the lender two values. The market value is related to the purchase price and the mortgage value, whereas the minimum reinstatement value is the amount you would need to rebuild the property from the ground up. This information is useful when arranging buildings insurance.
Are mortgage valuation surveys the same as house surveys?
No, mortgage valuation surveys are different from house surveys.
Mortgage valuation surveys are concerned with the property's value, whereas house surveys, or home buyer surveys, consider the condition of the property. A home buyers survey, or if you elect for one, a structural survey, is a thorough and detailed process confirming the property's condition, alerting you to possible defects or problems.
What happens if the mortgage valuation is lower than the purchase price?
There is a risk that the mortgage valuation will be lower than the price you've agreed with the vendor. In this scenario, the lender may reduce the loan they have offered, which could cause problems with the sale.
You would then be in the unfortunate position of negotiating a reduced price with the vendor, raising the extra cash yourself or pulling out of the deal. Your best chance is negotiating a reduced price with the vendor because if one surveyor has down-valued the property, there is a strong likelihood that other surveyors would too. We would highly recommend engaging an experienced broker for advice on this.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
