What Is A Mortgage Valuation?

A mortgage valuation is a specific type of assessment done by the mortgage lender to help them confirm a property’s value. It’s also used to see if the property will be adequate security for the loan you’ve applied for. Your lender will usually arrange a mortgage valuation. compare conveyance costs  with our conveyancing fees calculator.

What Is A Mortgage Valuation?

Sometimes called valuation surveys, mortgage valuations are conducted purely for the benefit of your lender. They are done because lenders need to be sure that the money they lend you is a worthwhile investment. Your property must be worth enough to justify the loan.

In other words, mortgage valuations help lenders decide whether or not the price you are paying for the property is fair. 

However, the extent of this kind of survey is limited.

What Is The Difference Between A Mortgage Valuation And A House Survey?

Mortgage valuations are for the benefit of the lender, even though you may have to pay for the valuation yourself. They are limited in scope.

House surveys are conducted for the benefit of the buyer. Unlike mortgage valuations, home buyer’s reports and full structural surveys are more in depth. They will uncover defects that may be missed by a valuation survey. 

In short: 

• A house survey will provide peace of mind to buyers over the condition of the property. 
• Mortgage valuations help lenders make a decision on the validity of the loan amount requested.

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Do I Need A Mortgage Valuation And A House Survey?

In most cases, you will need both. As mentioned above, mortgage valuations and house surveys differ in purpose. Buyers shouldn’t proceed purely on the outcome of the former.

However, sometimes a home buyer’s report will include a valuation as well. There is a catch though – many lenders won’t accept them. Check the small print. This is especially important if the inclusion of a valuation in the home buyer’s report incurs an additional fee.

How Are Mortgage Valuations Conducted?

Your lender will instruct a surveyor to carry out the mortgage valuation. This may or may not be done in person. Whether or not the surveyor will actually visit the property will be determined by several factors, which can vary considerably between lenders.

• ‘Drive-by valuations are becoming more and more commonplace, and some mortgage valuations won’t even require that. 
• Desk-based valuations are not unheard of, and they are conducted by analysing various data points such as Land Registry and local house price statistics held by the lender themselves. 

These figures are fed into an Automated Valuation Model (AVM) (an algorithm built for the task) to provide the surveyor with a valuation of the property in question.

By avoiding visiting properties in person, surveyors are able to lower the fees they charge. This cost-cutting allows lenders to offer free mortgage valuations as an enticement to prospective clients, so there are benefits to all concerned.

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What Is Considered In A Mortgage Valuation?

If your lender requires a physical inspection of the property, you might be wondering what exactly they are going to look at.

Here are a few things that will be looked for:

• Damp
• Potential risk of damage from nearby trees
• External cladding
• Suspicion of structural movement
• Unclear lease terms
• State of the roof tiles
• The surveyor suspects the property is concrete built

What Does A Mortgage Valuation Tell You?

As the buyer, very little. Don’t expect too much information about the property to flow back to you. In some instances, you won’t even see the final report. The surveyor will inform your lender of their findings. You may well be left in the dark – even if you paid for it.

Do I Pay For A Mortgage Valuation? 

Many lenders offer mortgage valuations free of charge in order to win your business but this isn’t always the case. The valuation fee can vary from £250 to £1,500. This depends on the value of the property being surveyed. The results are usually back within a fortnight.

What Happens After The Mortgage Valuation?

After the mortgage valuation the surveyor will report back to the lender with their findings. If the valuation matches the loan amount requested, the lender will make a decision on whether or not to grant your mortgage offer. In most cases, this will be a formality.

For those whose valuation falls short of the asking price you will be left with a ‘down valuation’. For sellers, a down valuation could result in a lost sale. Even the best case scenario for sellers will be having to accept less than their asking price for the sale to continue.

You might expect buyers to be in a contrasting position, but it isn’t as straightforward as that. Down valuations may result in a cheaper purchase, but not always. The seller is under no obligation to negotiate and they may flat out refuse to match the mortgage valuation.

Equally, a lender isn’t going to offer more than the mortgage valuation prices the property at. You might have to to find the difference in cash. Naturally, this isn’t a viable option for most buyers.

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