What is a mortgage valuation?
Before your mortgage is accepted, your chosen lender will carry out a mortgage valuation or ‘valuation survey’ of the property to check whether it’s worth the money that you’ve agreed to pay for it.
A mortgage valuation is carried out for the benefit of the lender. They want to find out if the property is worth the money that they’re offering to lend you.
What’s the difference between a mortgage valuation and a house survey?
While it will be carried out by a qualified surveyor, a mortgage valuation is NOT a property survey.
They will do a quick assessment of the property which may identify some condition issues such as damp or subsidence, but the report will be much less thorough than an independent survey.
Remember, the valuer is only concerned with problems that might affect the protection of the mortgage lender’s loan. The lender simply needs to know that they could recoup their loan if they needed to. The report is done for the lender’s benefit, not yours. In fact, it’s likely you may never see the report yourself and if you find any problems when you move in, you have no recourse.
For this reason, you should never rely on a mortgage valuation alone to get a picture of the condition of a property. We recommend getting a proper, independent building survey to avoid buying a property with unexpected problems.
If you’re in Scotland, you will need to spend time looking at the property’s Home Report.
How long does a mortgage valuation take?
The length of time a mortgage valuation takes will depend on how it is carried out.
Traditionally, a surveyor would physically go to the property and thoroughly inspect it to estimate its value. However, now there’s option to carry out the valuation, in ‘drive by’ fashion, or carrying out an ‘AVM’ – automated valuation model – where the valuer reviews the property’s value online.
Typically, a mortgage valuation’s findings can be returned within a couple of weeks. But it may be slightly longer or shorter depending how thorough their investigation is.
How much does a mortgage valuation cost?
A mortgage valuation can vary dramatically in price, as the cost is calculated according to the value of the home being assessed.
The price will generally be somewhere within the range of £150-£1,500. So, it’s best to try and budget for a more expensive valuation to be safe. However, your mortgage broker should be able to give you an indicator of the value of the property, or what your lender often charges, and therefore the cost of a valuation.
Be aware that you don't pick your mortgage valuer, and often the price is included with the other costs of your mortgage. The valuation will all be done through the lender. You won’t need to worry about setting it up, but you will be the one paying for it.
Some lenders do, however, offer valuations for free as part of their mortgage deal, as an incentive to pick them. Again, your mortgage broker can help you find a deal like this if it interests you.
What happens after a mortgage valuation?
The surveyor will use their findings to determine whether they agree with the agreed sale price.
If they believe that it’s worth the agreed price, your lender will likely offer you the loan that you requested.
However, the surveyor may decide that the house if worth less than the value of the loan. This is called a ‘down valuation’. Getting a down valuation could mean your lender will reduce their mortgage offer.
What would a down valuation mean for me?
A down valuation is where the lender’s valuation comes back showing the value of the property is less than what you’ve been asked to pay for it.
For example, if the asking price for the house is £200,000, but the mortgage valuation comes back stating that the house is worth £180,000, the property has had a down valuation of £20,000.
When a property gets a down valuation, a lender will make one of two decisions.
They may decide that the risk is too high and so decide not to give you the mortgage, meaning the sale will fall through. Or they may decide to give you the mortgage, but at a higher loan to value, meaning they’ll pay less towards the house, and you’ll have to make up the shortfall by paying a higher deposit.
Many buyers won’t be able to afford this new deal, meaning the sale could again fall through.
Why do down valuations happen?
Down valuations generally happen when the expectations of sellers and estate agents don’t match market value house prices. For example, house prices in a certain area could be lower than the average figures that are reported in the news.
What should I do if my property has been down valued?
You have a few options if the house you want to buy has been down valued.
You could use the down valuation to renegotiate the price with the seller. It could be in their interest to agree a lower price with you as they may struggle to get what they originally wanted from other buyers.
However, the seller may not want to lower the price. In this situation, you could try to challenge the valuation with proof that the property is worth what you said it was when you applied for the mortgage. But bear in mind that you’ll need to have strong evidence, and lenders don’t have to accept your challenge.
If you have no evidence to challenge the down valuation, you could try another lender in the hopes that their surveyor will reach a valuation that’s closer to what you were expecting. But this isn’t guaranteed to get you the result you want.
Finally, if all else fails, you could bite the bullet and accept the new mortgage offer and make up the rest of the money elsewhere. However, this isn’t going to be an option for most people.
How do I avoid a down valuation?
Buying a home or remorgaging is stressful enough without a down valuation.
Whether you’re buying or selling, here’s what you can do to avoid it happening to you.
1: Research the property market
Having a good understanding of the current property market is one of the most important things you can do to avoid a down valuation.
Find out how much nearby properties have sold for in the past six months to get a realistic idea of what the price should be.
2: Get expert advice
Reaching out for expert advice will help you to get an informed idea of how much the property you want to buy or sell is worth. Local estate agents will give you a good picture of what the market is like in your area.
When you’re selling a house, getting multiple valuations from different estate agents can be helpful. They’ll probably each give you a different figure, from which you can assume that the average number is the most realistic. You can then use this average figure when you put the property on the market.
3: Make an informed offer
If your research tells you that the house that you’re interested in is overvalued, try making an offer that’s below the asking price.
Your offer may not be accepted. But you’ll save yourself a lot of bother if it is.
Updated October 2022 by Adam Rivers