Mortgage Valuations Explained - HomeOwners Alliance (2024)

Your lender will require a mortgage valuation when you apply for a mortgage and you may need one if you remortgage too. But what are mortgage valuations, who carries them out, how long do they take and what problems can arise?

When you apply for a mortgage, your lender will insist on a mortgage valuation being carried out. They’ll do this to check whether the house is worth what you’ve agreed to pay for it and to work out the loan-to-value ratio too. But when you have a mortgage valuation, what is the surveyor looking for? And what are the potential pitfalls? Read on to find out….

What are mortgage valuations?

When you apply for a mortgage your lender will commission a mortgage valuation, also known as a valuation survey, to assess whether the house is worth what you’re planning to pay for it. Mortgage valuations also help lenders calculate the loan-to-value (LTV) ratio; this is the amount you want to borrow in relation to the value of your home. The LTV will determine the mortgage rates you are eligible for; the lower your LTV, the more mortgages will be available to you.

Lenders may also want to commission a mortgage valuation when you remortgage.

To avoid confusion, it’s important to note that mortgage valuations are not the same as:

• A house price valuation made by estate agents when advising you how much you should put your home on the market for.

• A house survey which you might commission to assess the condition of a property you’re planning to buy

Instead, mortgage valuations are for the benefit of the lender – not you. Your lender will insist on using a company they trust, you’re unlikely to see their report, and you will have to pay for it unless they’re offering a free valuation (read on for more on costs).

If you are thinking of getting your own house survey, you can find out more about the types and costs of surveys in our detailed guide –what type of survey should I to have?

What does a mortgage valuation surveyor look for?

So how do mortgage valuations work? This depends on the type of valuation the lender instructs the surveyor to do. Traditionally, the surveyor would visit the property in person and compile a report. But increasingly, with technology and post-COVID, surveyors are valuing houses from their desktop and sometimes by driving-by to see the property from the outside too.

You won’t get to choose what type of survey is undertaken, the lender will decide. Factors that may have a bearing on the decision of whether to visit the property in person or not might include things like if there’s anything that may cause an issue with lending, like if the property is made of a non-standard material like concrete. Or they may opt for an in-person visit if the lender hasn’t lent in the area previously or there isn’t enough information online about the property.

What happens when a surveyor visits the property?

If the lender instructs the surveyor to visit the property, they’ll usually take around 15-30 minutes looking for any obvious defects that might affect its value. Following the visit, the surveyor will give their opinion on the market value of the property. They’ll look at historic sales of similar properties locally as well as their knowledge of the market. They may also give their insight on what the ‘minimum reinstatement value’ is. This is the amount it would cost to rebuild the property. And this can be useful to know when you’re looking for buildings insurance.

How do drive-by and desktop valuations work?

Desktop valuations assess the value of a home using publicly available information – and as the name suggests, this can be done at a desk. This includes getting information from the Land Registry, property portal archives, satellite and street-view imagery, as well as analysing the sold prices of similar properties locally to give a valuation figure. These valuations are sometimes carried out with the help of an index-linked, Automated Valuation Model (AVM). These can estimate values according to how much house prices have either increased or decreased in a certain area or postcode, since a previous Land Registry entry.

In some cases they will conduct a ‘drive-by valuation’. This is when the surveyor assesses the property from the outside. They’ll usually do a basic inspection of the outside of property, looking for major problems on the roof or walls, which could affect the value of the property.

Is a mortgage valuation the same as a survey?

No. ‘Is a mortgage valuation the same as a survey’ is a common question but they are completely different. Mortgage valuations are for the benefit of your mortgage lender to satisfy them the property is sufficient security for the loan and you may not even see the report.

By comparison, a house survey is an inspection of a property’s condition conducted by a surveyor that is usually organised by the house buyer. The surveyor will tell you if there are any issues to do with the condition of the property from minor to significant structural problems. They will highlight what repairs or alterations are needed, whether it’s addressing a damp patch or replacing a whole roof. The level of detail your house survey goes into will depend on the type you have. Read more in our guide on house survey types and costs.

When you buy a house, it can feel like a survey is just another thing to pay for. But they can be money well spent, especially if it flags up potential issues with the property. For more advice on choosing a surveyor, see our guide How to find a surveyor when buying a house.

If the house you are buying performs badly in a survey, you may be able to get things fixed before you move in or negotiate money off the asking price – see our guide on What to do After a Bad House Survey.

If you’re buying a home you’ll want to arrange a survey. Instantly find and compare quotes from local surveyors using our handy find a surveyor tool

Why else would I need a valuation survey?

While valuation surveys are most commonly arranged by a Bank or Building Society as part of a mortgage application process there are other reasons why you may need a valuation report. For example, you may need a valuation survey for probate after the owner or one of the property’s owners has died or if you’re divorcing and want to determine an accurate value for the property. You will also need a valuation survey if you want to sell or remortgage a Help to Buy or shared ownership home.

But it’s important to shop around when your looking for a surveyor to appoint. And speak to your surveyor beforeappointing them and ensure they have satisfactory qualifications, accreditation, experience and insurance. A Chartered Surveyor will be a member of the Royal Institution of Chartered Surveyors (RICS) andhave the letters MRICS or FRICS after his or her name. The RICS ensures that all its members maintain professional standards in their work.

You can instantly receive quotes from Chartered Surveyors in your local area with our handy Valuation Survey tool.

Mortgage valuation survey cost

The mortgage valuation survey cost usually varies depending on the size of the property. However, some lenders charge a flat fee. Some lenders throw in free valuations as part of a mortgage deal but don’t let that alone sway you. A deal with a lower interest rate is likely to save you far more over time, even if you pay more for the mortgage valuation. For mortgage advice, speak to a fee-free mortgage broker that can advise you on the best deals.

What happens after mortgage valuations?

So what happens after mortgage valuations? After the surveyor has conducted their mortgage valuation they’ll report back to your mortgage lender with their opinion of the market value of the property. And if they agree with the sale price or remortgaging amount, it’s an important step towards getting your mortgage application rubber stamped.

However, when your mortgage valuation is completed it doesn’t mean your mortgage application is approved because there may be other requirements that haven’t been met yet. Also, mortgage valuations can flag issues such as if the property is in such a bad condition if affects the security of the loan or if the property value is determined to be lower than the offer price.

Mortgage valuation lower than offer

When a surveyor reports that a property is worth less than the agreed sale price it’s known as a down valuation. One scerario where this might happen is if house prices are falling faster than in other areas and there’s a difference between what estate agents and sellers believe the house is worth and the opinion of the surveyor.

When a mortgage valuation is lower than the agreed sale price it can cause major problems with your mortgage offer because the mortgage lender may reduce the amount of money they are willing to lend you. You may also not be able to borrow at the same interest rate.

• For example, if you plan to buy a home for £300,000 and you have a £60,000 deposit you’ll need a 80% mortgage to borrow the required £240,000. But if the surveyor gives the property a market value of £250,000 and the lender offers to lend you 80% of the valuation price you’ll only be able to borrow £200,000. Add this to your deposit and you’ll only have £260,000 – £40,000 less than you need.

When a mortgage valuation is lower than your offer

When a property you want to buy is down valued, your first step should be to try to renegotiate with the seller. However if the seller won’t reduce the price or if you’re remortgaging, you may be able to challenge a down valuation.

Alternatively, you may be able to get around the problem by choosing another mortgage product with a higher loan to value. Using the above example to illustrate, if you can find a 95% mortgage, you would be able to borrow £237,500 which is just shy of what you’ll need so you would need to find the outstanding amount. This is where a fee-free mortgage broker can help in finding solutions.

If you can’t afford to make up the shortfall with other savings, you may want to try a different lender which uses a different surveyor. You may get a different result. Again, it’s a good idea to speak to a fee-free mortgage broker for advice on this.

What happens if the mortgage valuation is higher?

What if the reverse happens and your mortgage valuation is higher than the purchase price? This tends to be because the purchase price is lower than the market value.

How long after a valuation can you expect a mortgage offer?

Assuming there are no problems with the valuation and that all the boxes are ticked regarding your application, when the valuation has been completed you’ll usually get your mortgage offer a week or so later but this can vary based onindividual circ*mstances. For more on the mortgage timeline, see how long does it take to get a mortgage offer.

House valuation what do they check?

So with a house valuation what do they check? If the surveyor conducting the valuation believes the property needs further investigation they will tell the mortgage lender, but bear in mind the level of detail regarding defects is limited. And you may not even see the report.

With mortgage valuations, depending on any defects being picked up may mean your lender decides not to approve your application unless there is further investigation or until the issue is remedied.

What defects may a mortgage valuation flag up?

Mortgage valuations can flag up defects to lenders that may impact the property’s value. So if you’re asking with a mortgage valuation what do they look for, here are some examples….

1. Suspicions of or actual Subsidence

Comments will vary depending on the circ*mstance, for example they could report there is structural movement and that you need to get a structural engineer or chartered building surveyor to make a detailed investigation and give you a full report identifying the cause and the costs of the work necessary to ensure future stability, before they can give a valuation. Or it could be they recommend specialist advice if there are trees close to the property. Read our guide on Subsidence: What it is and how to prevent it.

2. Damp

And if there is evidence of damp it may suggest you should instruct a damp and timber treatment contractor to investigate the full extent.

3. Concrete Built

The surveyor feels the property is concrete built. Your lender may require you to instruct a structural engineer or chartered building surveyor to conduct an intrusive survey to assess the property to confirm if it was built using concrete.

4. Spray foam insulation

Spray foam insulation can put stress on roof timbers and reduce air circulation, causing rot. As surveyors are finding spray foam insulation in lofts, they are having to report it. And even if it is well applied, because of its very nature, it is very hard to assess the condition of the loft and roof underneath the insulating foam. This means most surveyors recommend more investigation – at which point mortgage lenders simply refuse to lend unless the spray foam insulation is removed. Read more in our guide – Spray Foam Insulation – A Warning.

House valuation for remortgage – what to expect?

If you’re asking about a house valuation for a remortgage and what you can expect, the answer is it’s the same mortgage valuations process as if you’re buying a property. The lender will check what the property is worth before approving you for a new mortgage deal. ‍

What does the lender need from you?

With mortgage valuations, depending on your property, the lender may ask for additional documents:

Structural Defects Warranty (SDW)

A lender may ask for a Structural Defects Warranty (SDW) if the property is under 10 years old. Or it has been converted or extensively renovated. This will be provided by the developer or bought by the original homeowner. They’re designed to provide cover in the event of needing to carry out repairs or remedial works resulting from of structural defects in new buildings.Read our guide on New Build Home Warranties – what they do and don’t cover.

External Wall System (EWS1) form

If you live in a flat, or are considering buying one, your mortgage lender may ask to see the building’s EWS1 form. The form is evidence that a building with potentially combustible cladding has had a fire safety assessment. Find the latest information in our guide on EWS1 forms.

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