A mortgage valuation, or ‘valuation survey’ determines the market value of a property. They are for the benefit of the mortgage lender, not you.
When you apply for a mortgage, your lender will commission a mortgage valuation to help them calculate the loan-to-value (LTV) ratio, i.e., the amount you want to borrow in relation to the value of the property. The LTV will determine the mortgage rate you are eligible for. The lower your LTV, the more mortgages will be available to you.
The lender will be the ones to choose the company they use to provide the valuation. You may have to cover this cost and it’s unlikely you will get to view the completed report.
Lenders may also want a valuation done if you are remortgaging to check the property is worth what you’ve stated on the application.
How is a valuation conducted
Pre-Covid, surveyors would visit the property to compile their report. Post Covid, it is more common for surveyors to do a desktop report, tapping into their vast amount of online sales data, property archives and gathering information from the Land Registry. They may also drive to the property and take a look at the outside to check its general condition.
The valuation takes into account the size of the property, its age and location.
What happens after a valuation
Hopefully the valuation will come back either in line with the offer made on the property or valued higher, in which case, the purchaser is winning. However, there is a chance the property is down valued. This means the surveyor has decided the property is worth less than the agreed sale price, or proposed remortgage value. This will negatively affect the amount the lender is willing to loan.
This can happen when the housing market is out of sync with current market trends or there can be a discrepancy between what the estate agent and vendors think a property is worth, and the surveyors mortgage valuation.
It’s important to remember mortgage valuations are not the same as house price valuations or house surveys. A house price valuation is conducted by estate agents to advise how much a property should be marketed for. A house survey is commissioned by purchasers to assess the condition of a property they are planning to buy.
Ultimately, a mortgage valuation will give you a rough idea of whether you’re potentially paying too much or too little for a property and will help determine what type of mortgage you will qualify for.
If you would like more information about mortgage valuations or would like to book my services then please get in touch.