What to expect? Should you rely on a mortgage valuation?

When you use a mortgage to buy a house, your lender will commission a mortgage valuation survey to ensure that the property’s value provides sufficient security for the proposed loan. A qualified surveyor will undertake the survey, leading many people to choose to opt-out of an in-depth survey and rely on the mortgage valuation.

We look at the ins and outs of a mortgage valuation survey and explain why they are not a substitute for a detailed home survey.

mortgage valuation

What is a mortgage valuation?

It is important to remember the mortgage valuation survey will be conducted solely for your lender’s benefit even though it will be you who pays the mortgage valuation fee. Your mortgage lender is only interested in establishing what the property is worth and whether there are any defects or features which would impact its value as security for your loan. The report will be brief and will mention only significant issues and the estimated value of the property.

How do mortgage valuations work?

A mortgage valuation involves a short inspection and may take just a few minutes. You might never see the report, as some lenders do not provide a copy to their customers. Even if you do get your hands on it, the two or three pages of information it contains will fall short of covering everything you need to know.

You can’t rely on the mortgage valuation process to tell you if you are about to invest in a goldmine or a money pit.

Mortgage valuations vs house surveys

To avoid a potential financial disaster, it is always best to commission a survey of the property you intend to purchase. Ensure your surveyor is a member of a recognised professional body such as the Royal Institution of Chartered Surveyors (RICS) or the Residential Property Surveyors Association (RPSA). If the property is unusual or unique, choose a surveyor with specialist knowledge of that building type.

There are three levels of homebuyer survey

  • Level 1 – Condition Report
  • Level 2 – Homebuyer Report
  • Level 3 – Building Survey

Condition Report

A condition report will be only marginally more informative than a mortgage valuation and may leave many questions unanswered.

Homebuyer Report

A Homebuyer Report will reveal most major problems, but the surveyor will not look behind furniture or lift the flooring. This type of survey will usually be accompanied by caveats limiting the liability of the surveyor, and so could prove pointless if you discover a serious issue with the property after you have bought it. This type of report can be commissioned to include a reinstatement value for the property, in other words, the cost of completely rebuilding it in the event of a disaster.

Building Survey

A Building Survey is the most comprehensive choice but also the most expensive. The surveyor will check every aspect of the property, internally and externally. A few days later, you will receive a lengthy report covering everything from structural issues to the proximity of Japanese knotweed. The report will highlight any potential or existing issues and the necessary repairs. The report will also tell you what could happen if you don’t make the recommended repairs. Your surveyor should indicate the relative importance of each problem that has been identified and may provide estimates for the cost of the work required.

home survey

How does a detailed house survey help me?

Armed with the knowledge from a homebuyer or building survey, you can make an informed decision as to whether you should proceed with the purchase. You will also have the ammunition you need to negotiate a lower price for the property if the extent of the required work means that the previously agreed price is unrealistic.

If your survey reveals no issues with the property, it can you leave you feeling that you have spent a significant amount of money for no good reason. On the other hand, if a major structural problem is revealed, you will be eternally grateful that you found out before it was too late. A survey is always a worthwhile investment because even relatively minor problems can end up costing you a small fortune to rectify.

It is vital that you buy your property at the right price and can afford to undertake any required work. A survey is the easiest way to obtain the information you need and could save you a great deal of heartache – not to mention expenditure.

How much does a mortgage valuation cost?

The amount you pay is based on the value and size of the property. According to the Money Advice Service a mortgage valuation survey will cost you between £150 and £1,500. You generally have to pay this upfront when you make your mortgage application.

Sometimes lenders offer mortgages with free valuation surveys.

What happens after a mortgage valuation?

If the surveyor values the property in line with the purchase or re-mortgaging price your lender will offer you the loan.

Sometimes surveyors will down value the property; in this case, your lender will either revise or withdraw your mortgage offer.

BTL Mortgage

What to do if my property has been down valued?

If the mortgage valuation survey gives a value less then your offer price, you can either:

  • Try to renegotiate the sale price with the seller – you are in a strong bargaining position because if your lender doesn’t think the property is worth the asking price the chances are others will have the same view.
  • Dispute the valuation if you can provide evidence of similar properties in the area selling for the same price – your estate agent should be able to help you with this but remember it is up to the lender whether they accept your challenge.
  • Request a new survey using another approved surveyor

How do I avoid a down valuation?

Down valuations are troublesome for both buyers and sellers. Here are a few steps that can be taken by both parties to avoid this:

  1. Request a local surveyor as their knowledge of the local market will ensure an accurate valuation.
  2. Sellers: set a realistic price – ask at least three local estate agents to value your home, ask them about similar properties they have sold recently. Don’t necessarily go for the highest valuation.
  3. Buyers: make a realistic offer – research what similar properties in the area are selling for, don’t be afraid to go in with a lower offer.
  4. Find the right mortgage provider, if the property you would like to buy is unusual, it might be worth seeking a specialist lender.