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Valuing your home for mortgage or re-mortgage purposes

Valuing your home for mortgage or re-mortgage purposes

Getting an accurate valuation on your home is vital for a smooth purchase or remortgage process. In this article, we go through what a mortgage valuation, is, does, and how to avoid common problems. As always, we are here to help, so if you have further questions, use our local branch finder to contact your nearest haart estate agents.

What is a mortgage valuation?

A mortgage valuation is a way for a lender to check that a property you are planning to purchase is worth what you are going to pay for it. Sometimes it’s called a valuation survey, but it’s the same thing. Your mortgage lender may also carry out a mortgage valuation when you apply to remortgage the property you already own, again to check that the properties worth matches what you have put down on the paperwork.

Although it might seem like a mortgage valuation only really benefits your lender, it can also help you to know if you’re paying too much or too little for a property.

How do mortgage valuations work?

There are a few ways a mortgage valuation can be carried out, and you don’t get to choose. The lender will decide whether to use the traditional way of sending a surveyor to your property to make a report, or they may use online sales data or drive past the property to assess the area and its state. Whichever method they use, a lender will always use a surveyor's professional opinion on the value of the property to make its final decision on what size of loan it will offer you.

According to the Royal Institute of Chartered Surveyors (RICS), the type of survey you get is driven by ‘the lender's risk appetite’. This means a lot will depend on what kind of property you are buying or remortgaging. For example, if the property you're planning to buy is made of a non-standard building material, the lender is more likely to instruct a surveyor make a physical visit. If a lender hasn't lent in the area before or can't find enough information about the property online, this could also increase the likelihood of a physical valuation.  

These days, more lenders offer free valuations, reducing the physical surveyor visits and cutting costs for the lender. Plus, so much information is available to a lender online, it is easy to assess how suitable a property is for a mortgage.

Mortgage valuations vs house surveys

As we have explained, a mortgage valuation is beneficial for the lender as it helps them decide if and what to lend you to purchase it. However, a mortgage valuation is not the same as a house survey. A house survey is a service you pay for that comes in various levels of depth, which can point out potential issues that could affect your purchase or future resell value of the property. Be aware that even if you pay for a mortgage valuation, there’s no guarantee you will see the valuation report or find out what the surveyor has told the lender, so think about the level of risk you wish to procede with.

A mortgage valuation is a brief visit that often won’t include a look inside the property, which is why a survey is the only way you can guarantee finding out if there are issues such as damp, structural issues, or other concerns that could affect the value of the property now or later.

There are four main types of survey: A mortgage valuation survey (what we’ve just been talking about), a condition report, a homebuyer report and a building survey (sometimes called a full structural survey). We have more details on each of these surveys here and we can help you choose the right property survey for you.

How much does a mortgage valuation cost?

The cost of a mortgage valuation is usually based on the price of the property so can range between £150 and £1,500. Some lenders may offer the service for free.

What happens after a mortgage valuation?

After a mortgage valuation, the surveyor will give their opinion on the value of the property to your mortgage lender. If the two agree on the sale price or the remortgaging price, your lender will offer you the money you have asked them to loan you.

However, sometimes a surveyor may say the property price is higher than its worth and this is called a ‘down valuation'. This could mean your lender decides to rethink the mortgage offer and it will halt the process of you buying property of remortgaging. The lender will need to reissue an offer and start the process again. Don’t panic if this happens, there are ways to avoid a down valuation which we will go through shortly. First let’s look at down valuations in a little more detail.

What is a down valuation and will it affect your mortgage?

A down valuation occurs when a surveyor decides a property is worth less than the agreed sale price, or proposed remortgage value. For example, let’s say you want to buy a £250,000 property and have a 10% (£25,000) deposit. You will have requested a mortgage from your lender for the remaining 90% of the property’s value. But if the lender’s mortgage valuation surveyor reports the property is actually worth £200,000, your lender will only be giving you 90% of that amount, £180,000. That’s £45,000 less than you need to buy the property you want.

Down valuations usually happen when house prices are out of sync with current market trends. House prices fluctuate and every area is different, so an estate agent might believe a property is worth more than a mortgage valuation surveyor. It will affect your mortgage to receive a down valuation, however there are some ways to avoid it happening to you.

How can you avoid a down valuation?

If you have been given a down valuation, you can try an alternative lender that uses a different surveying company. This may get your a valuation closer to your original agreed sale price, but there is no guarantee. Some lenders allow you to appeal a valuation, but this isn’t common.

Here are some ways to avoid a down valuation:

Research the property’s value 

Look at how much properties in the area have sold for over the past three to six months. Look at properties similar to the one you want to purchase, (or yours if you are remortgagin) as a larger or smaller property won’t be an accurate guide. If you have a two bed house with a garden, a one bed flat with no garden will not be helpful.

Get an expert opinion 

Choose a local estate agent who has recently sold properties similar to yours to value your home. haart has agents across the UK, all with expert knowledge of the local area. We can take a look at the property, offer insight into local market activity and use our experience to give you a suggested price.

Check with your lender 

If you are selling your home or a property, you can check the value your existing lender has on file to guide you to a realistic current price.

Make a realistic offer 

If you’re a buyer, use your research to make a realistic offer on a property. Don’t be afraid to offer under the asking price if you have evidence that other houses in the area are selling for much less than the property is up for sale for.

Find the right mortgage provider 

Most standard properties like houses, flats, and bungalows can be mortgaged with normal lenders. But, if you are going for a unique property, say a listed building, older structure, or home in a less common location, it might be worth getting a mortgage provider who has dealt with this kind of thing before and knows how best to work with lending on these properties.  If you are looking for mortgage advice, haart are partnered with Just Mortgages with advisers all over the UK and can help you with your mortgage needs as well as remortgaging your property. 

Get moving

From our jargon buster to advice for buyers, haart is on a mission to get you moved with as little stress as possible. If you are looking to buy or sell property, we can help. Get in touch today and see what we can do for you.