Mortgage valuation survey (A complete guide)

In this brief guide, we are going to discuss the mortgage valuation survey, the cost, what to expect and how long a mortgage valuation survey takes.

What is a mortgage valuation survey?

A mortgage valuation survey is a valuation which the mortgage lender carries out before they provide you with a mortgage offer. 

The mortgage lender will carry out a mortgage valuation survey in order to determine if the property is worth what you are paying for it and determine if their mortgage is actually secured on a good asset.

If the mortgage valuation reveals that the property is overpriced then the mortgage lender could reflect this in their mortgage offer to you(if they make one) and offer you a much lower loan to value than you might have first expected.

This will mean you will need to increase your mortgage deposit.

As you can see, the mortgage valuation survey is very important as it determines the size of the mortgage which the mortgage lender will offer you.

The most important thing to note is that a mortgage valuation is not an in-depth analysis of the property but rather a brief look to determine what the property is valued at.

A mortgage lender will also carry out a mortgage valuation survey for a remortgage to ensure that the property is worth what you have stated on your remortgage application.

Most mortgage lenders offer a free mortgage valuation survey as a marketing ploy to attract homeowners looking to remortgage and prospective new borrowers.

How do mortgage valuations work?

A mortgage valuation could either be a desktop valuation or an in-person mortgage valuation.

A desktop mortgage valuation survey

A desktop valuation as the name applies is done over the desktop, it can take no more than 10mins to complete and is a relatively cheap way of carrying out a mortgage valuation survey.

Most mortgage lenders may carry out a desktop valuation.

An in-person mortgage valuation survey

An in-person mortgage valuation survey involves a surveyor going to view the property. The surveyor may simply look at the property but rarely enters the property to carry out a more extensive check.

The type of mortgage valuation you get will depend on the mortgage lenders risk appetite, the type of property you have and other factors concerning your mortgage application.

Example: If you have a non-standard construction property then the mortgage lender may be more inclined to carry out an in-person mortgage application.

If the mortgage amount is high then the mortgage lender may also be inclined to carry out an in-person mortgage valuation.

If the mortgage lender has never lent in the area before then the lender may want to carry out an in-person mortgage valuation to see what the property and the area are like.

If the mortgage lender is unable to find any data on the property through a desktop valuation then the mortgage lender will be forced to carry out an in-person valuation.

There may be little property data on an area if it is a new development.

A mortgage valuation provides some value to you too, although not all mortgage lenders will show you the results of the mortgage valuation survey.

A mortgage valuation will let you know if you are paying too much on the property and allow you to back off the deal or inform you on if you are getting a good deal which could potentially lead to you being offered a favourable loan to value on your mortgage.

What happens during an in-person mortgage valuation?

During an in-person mortgage valuation, the surveyor will spend between 15 to 30 minutes looking at the property. They may ask to see the interior of the property but this is not very common.

The surveyor will look for any key things which could affect the value of the property or anything which could be of concern such as Japanese knotweed or mould.

Once the surveyor is done, they will compile a report for the mortgage lender which states thor key findings and what they think the property is worth.

To determine what they think the property is worth the surveyor will usually compare the recent sales of three properties in the local area which are similar to the one you want to buy and use their local knowledge of the market.

The surveyor  may also provide the mortgage lender with a minimum reinstatement value which will be very helpful in determining the minimum value the property should be insured for.

What is the difference between a mortgage valuation and a house survey?

A mortgage valuation is quite different from a house survey and you should not use a mortgage valuation as the basis of your buying decision.

A mortgage valuation is simply a valuation survey carried out by the mortgage lender with the sole purpose of attaining a valuation figure on which they feel the property could be worth.

This is not an in depth survey on the property’s condition nor does it carry out a thorough analysis of the property’s value.

The mortgage valuation is solely for the mortgage lenders use and in some cases, the mortgage lender will not show you the results from the mortgage valuation even if you have paid for it.

On the other hand a home buyers survey is a more indepth look at the property’s condition to determine if it is inhabitable as well as many other factors concerning it.

A home buyers report will contain the properrtys structural survey and highlight any serious red flags which could affect the value of the property.

It is important to note that a home valuation survey and a mortgage valuation are not the same and you may not be able to use one in place of the other.

Most home buyers surveys will also not come with any property valuation figures and even if they do, they may not be acceptable to a mortgage lender.

How much does a home buyer survey cost?

A homebuyer survey may cost between £300 to £2000 depending on the size of the house.

How much does a mortgage valuation survey cost?

A mortgage valuaitonsurvey could cost between £150 and £1500 depending on the price of the property. 

Most mortgage lenders do offer a free mortgage valuation as a way to draw in more customers.

What happens if the surveyor gives a down mortgage valuation?

As mentioned before, a down mortgage valuation could cause the mortgage lender to offer you a smaller mortgage and hence a smaller loan to value. This could mean that you will need to put down a bigger mortgage deposit.

E,g you want to buy a property for £500,000 with a mortgage deposit of £50,000.

The surveyor carries out a mortgage valuation and states that the property is worth £400,000.

This means the mortgage lender will only offer you a mortgage comparatively to the £400,000 value.

If the mortgage lender’s LTV is 90% then the mortgage lender will offer you a mortgage of £360,000 and you will need to increase your mortgage deposit by £90,000.

On the face of things, it looks like your loan to value has dropped but in reality it stayed the same.

Use a Government scheme

Government schemes help you reduce the amount of mortgage deposit you may need to put down, reduce the price of the property or create a structure that increases your mortgage affordability much sooner than it would have been.

Some of these include first-time buyer government schemes whilst others in this list are accessible to you even if you are not a first-time buyer.

Government schemes are not available to you if you are getting a buy to let mortgage.

The Government schemes include:

  • Lifetime ISA– gives you a government bonus of £1,000 if you save a maximum £4,000 a year.
  • Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
  • Help to buy equity loan– gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
  • Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
  • Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
  • Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
  • Right to buy– allows you to buy your home at a discount price.
  • Preserved right to buy– same as above.
  • Right to acquire– similar to the above.

Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.

You can check if you are eligible for these government schemes by using a government scheme eligibility calculator.

Why would a surveyor give you a down valuation?

There are several reasons why a surveyor would give you a down valuation.

If the property is not in sync with the values of recent sales transactions in the area.

If the transaction levels aren’t what they once were in other areas or house prices are falling faster than usual in other areas.

What can you do if you receive a down valuation?

The first thing you can do if you receive a down valuation is to try and renegotiate the property price with the seller.

If this proves to be none fruitful then you may have to increase your mortgage deposit to cover any shortfall between the mortgage the lender offers you and your current mortgage deposit.

In some cases, you may be able to convince the mortgage lender that the property is indeed worth more than the surveyor stated by paying for a comprehensive valuation.

You should be aware that the mortgage nder is under no obligation to accept the findings of your own survey, even if it is independently carried out.

Your final option would be to take your mortgage application to a different mortgage lender who uses a different surveyor.

You should only do this if you can prove that the property is worth more but you should also take into account the effects of having a recent search on your credit profile from the first mortgage lender and consider seeking mortgage advice from a mortgage broker about this.

How to avoid receiving a down valuation?

To avoid a down valuation there are a few things you can do:

  • Research the property price and carry out your own survey before the mortgage lender does. The problem with this is that you may end up incurring and upfront cost and not end up buying the property.
  • Make a realistic and sensible offer. Offering way above the market valuation for a house will likely lead you to get a down valuation.
  • Get suitable mortgage advice. If you are looking to get a non standard construction or a risky property such as a flat above a shop then you may find that the mortgage lenders who are willing to lend to you may not specialise in these sort of properties and hence may read too much into the mortgage valuations.  Using an experienced mortgage lender could be key.

Looking to get a mortgage? Use a mortgage broker

Use a mortgage broker for your mortgage in principle

You may want to use an independent mortgage broker to help you get a mortgage on your new home.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle

This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.

This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.

In this brief guide, we discussed the mortgage valuation survey, the cost, what to expect and how long a mortgage valuation survey takes.

If you have any questions or comments please let us know.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.