When you take out a mortgage, the home you’re looking to buy should be valued by your lender.
This is what’s called a mortgage valuation survey.
Before your lender makes a decision on your mortgage application, they have to view the property first to determine what it’s worth and whether you’re paying the right amount, and so they know how much they should be lending you. However, it’s unlikely this type of survey will uncover any detailed structural damage or repair work that needs to be carried out.
Valuing your home
Firstly, it’s important to note that a mortgage valuation survey is carried out for the benefit of your mortgage provider, rather than for you personally. Instead of pointing out structural flaws, your lender is more interested in verifying that the property is worth the amount you’re asking to borrow.
That’s why, depending on the individual lender and the size of the property, a valuation can be something as basic as simply looking at the property from the outside. Your lender may conduct what is called a “drive by valuation”, where they’ll view the exterior of your property. This will usually last around 15 to 30 minutes.
For larger properties, such as period properties, or in accordance with your lender’s valuation procedure, your mortgage provider might send someone to value your property from the inside.
When your lender has valued the property, they may provide you with what is called a “minimum reinstatement value”. This is an estimation of how much it would cost to rebuild the property from scratch. At a later point, your lender will request to see your buildings insurance, and they’ll want the minimum reinstatement value to be covered by this.
But, unlike a building or full structural survey, your mortgage lender isn’t there to identify any issues or repairs that need carrying out. That’s why, if you want to be sure there’s nothing physically wrong with the property - such as whether it is structurally sound - you’ll have to conduct either a full structural survey or a homebuyer’s survey instead. You can find out more about the different kinds of surveys here.
Carrying out a full survey or a homebuyer’s report instead gives you an element of protection should something go wrong with the structure of the property at a later date. You may be able to take legal action against the surveyor in this case, but you won’t be able to sue your mortgage lender for not flagging any issues up in a valuation survey.
What does it cost?
Some lenders may offer you a free valuation survey with a mortgage deal, so it’s worth checking this before you apply. However, sometimes you may be asked to pay a fee to cover the valuation. Costs can vary but range from £150 upwards depending on the age, value and size of the home you want to buy.
What if the property is valued at less than my offer?
It is possible that your mortgage lender will value the property below your offer price. If this is the case, you may want to return to the seller (or estate agent) and show them the results of the valuation. From here, you could make a lower-priced offer if the seller agrees with the valuation. You may be more successful if the property has been on the market for a while or if it hasn’t had many viewings.
If this doesn’t work, you might decide to dispute the valuation entirely. To do this, it’s a good idea to collect evidence of how much similar properties in the local area sold for. You can do this by searching via the Land Registry’s House Price Index here.
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