When applying for a new mortgage or remortgage, your mortgage lender will require a mortgage valuation. You might have loads of questions such as;
- What exactly is that?
- Who is responsible for this?
- and how long does the process take?
Furthermore, are there any potential issues along the way? With these questions in mind, let’s dive deep into understanding this crucial part of the home loan application valuation guide.
What is a Mortgage Valuation?
To ascertain if the purchase price reflects the market value, your lender will perform a mortgage valuation (a valuation survey). Another purpose is to help lenders assess the loan-to-value ratio (LTV), how much of the house’s worth you intend to borrow. This LTV then determines what kind of mortgage rates and deals you can access, generally speaking: lower LTV = more options available. It’s also possible that they may want to commission another valuation again when remortgaging.
It is essential to understand the distinction between mortgage valuations and other related services, such as a house price valuation conducted by estate agents when determining how much your home should be listed for or a house survey that could potentially inspect the condition of a property before purchasing it.
Instead, mortgage valuations are solely beneficial to the lender, not you. Therefore, a valuer your lender trusts will be chosen, and chances are high that you won’t get a glimpse of their report. Moreover, payment is due from your end unless they provide free valuation services.
Mortgage Valuation Survey Cost
The cost of a mortgage valuation survey usually varies depending on the property size, but some lenders provide flat fee services. Therefore, it can be tempting to accept deals with free valuations included. Yet, it would help if you didn’t let this sway your decision. Although the upfront cost may seem like more when opting for a lower interest rate deal in comparison, over time, these options will save you far more than any free valuations could offer. For advice surrounding mortgages and ensuring you get the best possible deal tailored to your needs, speak with an independent broker who can advise on the best way forward.
What Elements Does a Mortgage Valuation Surveyor Assess When Conducting an Inspection?
So, what is the process of a mortgage valuation? This varies based on which type of appraisal the lender asks for. Historically speaking, surveyors would have to enter and inspect a house in person before writing up their report. In recent years though – thanks to modern technology and post-pandemic regulations – valuations can now be completed remotely or through drive-bys where they view the property from its exterior.
The lender will determine which type of survey to undertake, considering various factors. For example, suppose the property has been constructed with an uncommon material like concrete or is situated in an unfamiliar area with little online information. In that case, they may opt for a physical visit. But, ultimately, this decision lies in their hands, and you won’t get to choose it yourself.
What if The Mortgage Appraisal is Lower than The Cost of The Property?
In some cases, your dream property may be valued at a lower amount than expected. This is called ‘down valuation’ and affects the loan amount you’re eligible for or the interest rate offered. As such, mortgage lenders might reduce the money they will lend you while not allowing access to their best rates.
In some cases, your dream property may be valued at a lower amount than expected. This is called ‘down valuation’ and affects the loan amount you’re eligible for or the interest rate offered. As such, mortgage lenders might reduce the money they will lend you while not allowing access to their best rates. The best way to approach this is to negotiate with the seller and try to come together at a mutually satisfactory price.
What Happens After Mortgage Valuations Have Been Carried Out?
Once the surveyor has finished their mortgage appraisal, they’ll provide your lender with an opinion on the property’s market value. Again, consistency between this valuation and either remortgaging amount or sale price is a significant stride in getting approval for your mortgage application.
While the mortgage valuation is a significant step in the process, it may mean something other than your loan application has been approved. Other conditions may still need to be met, and issues such as structural damages or discrepancies between offer prices and actual appraised values can impede progress.
Things to Bear in Mind
- Refrain from depending solely on a mortgage valuation when purchasing property – it is essential to consider other matters: A mortgage valuation is a brief inspection of the property and can, in some cases, be done solely with an online report without any physical evaluation. This type of assessment is intended only for the lender’s loan purposes.
- Securing a property survey on your behalf is an incredibly wise decision: This report will provide you with all the essential details about your property and alert you to any costly repairs that may be unavoidable.
- Not all mortgage lenders’ criteria are the same: Some properties may not meet your lender’s requirements for suitable mortgage security—for example, homes made of non-standard materials like prefabricated concrete or wood. With a professional valuation report, it may be possible to identify if a property construction is outside of the criteria.
Building insurance is required for securing a mortgage: Don’t be caught off guard when protecting your home. Buildings insurance is the answer. Not only will this cover you financially against any repairing or rebuilding costs, but you’ll need to make sure that a policy exists before exchanging contracts on a property—or remortgaging one. Thankfully, though, you’re able to pick and choose which provider suits your needs best.
**Your property is at risk if you do not keep up repayments on a mortgage.**
