Mortgage Valuations and Remortgage Valuations Explained
Getting an accurate valuation on the home you want to buy is vital for a smooth purchase or remortgage process. In this article, we explain what a mortgage valuation is, how they work and much they cost.
What is a mortgage valuation and how does it work?
A mortgage valuation is a type of survey that a mortgage lender undertakes. Mortgage valuations 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. It will to a large extent dictate whether the lender is prepared to offer the mortgage funds you need to complete the purchase.
Your mortgage lender may also carry out a remortgage valuation when you apply to remortgage the property you already own. This is to check that the property’s worth matches what you have submitted on the paperwork.
Although it might seem like mortgage valuations only really benefit lenders, it can also help to know if you’re paying too much or too little for a property. It is different from a house valuation because it is conducted in the interests of the lender, and is for the property that is being purchased, rather than sold. The mortgage valuation report is for the mortgage provider only.
There’s no report on the condition of the home you want to buy. That is covered by a Home Survey. The mortgage valuation survey may also take place virtually (desktop valuation) or without a close inspection of the property (drive-by valuation).
What is a remortgage valuation?
A remortgage valuation is effectively the same as a mortgage valuation, but it is conducted as part of the remortgaging process. If a homeowner wants to borrow more money against the property that they currently own, or switch to a new mortgage provider, a remortgage valuation will establish the value of the property as it is now.
What is a mortgage survey?
A mortgage survey is the same as a mortgage valuation.
Is a mortgage valuation the same as a home survey?
No, a mortgage valuation is not the same as a property or home survey. Property surveys are more detailed and are conducted on behalf of the buyers of a property. The objective of a mortgage valuation is to confirm to the lender that a property is worth the sale price, and offers enough security for the lender.
How much does a mortgage valuation cost?
The cost of mortgage valuations are usually based on the price of the property, so can range between £150 and £1,500. Some lenders may offer the service for free.
How much does a remortgage valuation cost?
The cost of remortgage valuations are often included in the price of your remortgage, or paid for by the lender. If not they usually cost between £300-£500, but some may be more expensive depending on the value of the property.
What is a mortgage valuation used for and why would I need one?
A mortgage valuation confirms whether the agreed sale price of a property is a fair one, and reflects the value of the property. Mortgage companies need to know this because the property is the security upon which they base their decision to lend funds.
A mortgage valuation takes place after you have agreed a price with the seller, and the property has been taken off the market. It happens after you have made your mortgage application, but before you receive a mortgage offer from the lender. Mortgage valuations are not optional – they are part of a lender’s standard business procedure.
What do mortgage valuers look for?
A surveyor will conduct the mortgage valuation – however, it is not always done in person. If a lender knows the particular area you are buying in well, and has enough information available, there may be no need to visit the property. If the surveyor does conduct an in-person survey, they will not ask to access the property – their valuation will be based on an exterior assessment.
They will look for things like non-standard building materials, or any structural issues that are visible and may affect the worth of the property.
The surveyor compares the property to similar ones in the area that have recently sold to determine its market value. They consider factors such as size, condition, location, and any unique features or improvements. The surveyor prepares a valuation report and the mortgage lender uses this information to determine whether the property's value aligns with the requested mortgage amount.
How do I prepare for a mortgage valuation survey or remortgaging valuation?
You do not need to do any serious preparation – in many cases because all a mortgage valuation survey will examine is whether the property is worth the price it is being purchased for. It will not go into any significant detail, and may not even involve a face to face visit. The only thing you may need to do is find any paperwork relating to the property. This can include New Home Warranties or External Wall System forms.
How do drive by and desktop valuations work?
The Mortgage valuation may not always involve a physical inspection or visit to the property by a surveyor. These are called Drive-by or Desktop valuations. When someone applies for a mortgage or remortgage, they will not know if their valuation is being conducted this way.
Drive By Valuations
Surveyors will travel to the property, but may only inspect visually from a distance. They will only be looking out for major flaws to the exterior that could affect a property’s valuation, like evidence of subsidence.
Desktop Valuations
As its name suggests, desktop valuations are completely virtual. Surveyors use what they know about similar properties, publicly available information or data from the Land Registry, as well as using tools like the Automated Valuation Model (AVM). This gives estimated values based on house price and postcode data. From these methods they will provide a mortgage valuation.
How long does a mortgage valuation take?
If the mortgage valuation is a physical visit by a surveyor, it will usually take between 15-30 minutes.
Why would a mortgage valuation fail and what can affect a mortgage valuation?
A mortgage valuation will fail if it shows that the market value of the property is less than the purchase price. This will usually lead to the mortgage application being refused by the lender.
Several factors may affect how a property is valued. Non-standard construction is one of the most common issues. This includes:
- Steel frames
- Thatched roofs
- Timber frames
- High-rise structures
- Prefabricated concrete
- Glass, wooden, concrete, metal or flintstone walls
If the surveyor has identified issues with the property’s condition, such as structural defects, dampness or signs of subsidence, this can lead to a lower than expected valuation. The valuer may deem these issues as posing a risk or requiring costly repairs, which can reduce the property's value.
Fluctuations in the property market can also affect property values. If property prices in the area have fallen since the initial purchase price was agreed upon, it could result in a lower valuation than expected.
Other factors include the location of the property, the size and layout of the property, and the type of property it is.
What happens if the mortgage valuation is different to the property price?
If the mortgage valuation is lower than the agreed sale price, it does not mean that the sale has to fall through. It may be possible to renegotiate the price with the seller, or you can challenge the valuation with your lender.
A lender may agree to proceed with the purchase, but lower the funds they lend. So you may have to seek the shortfall of money from another source, or increase your deposit.
Discuss your mortgage requirements with Just Mortgages
Most people need a mortgage before they buy a property. Knowing how much you can borrow and getting the process underway before you make any offers can help speed up any move.
For further information or to discuss your mortgage options please contact our mortgage partner Just Mortgages.