What is a Mortgage Valuation?
When applying for a mortgage, the bank will carry out a mortgage valuation or ‘valuation survey’. Its purpose is to check whether the proposed property is worth what is being offered for it. A lender may also want to carry out a valuation if the property is being remortgaged. The mortgage valuation only affects the mortgage you can get. Its scope only provides information regarding the suitability of the property as a security for the loan. Nonetheless, it can still give a buyer insight into whether they are paying too much or too little for a property.
How are mortgage valuations made?
There are multiple methods a lender can use to calculate a mortgage valuation. Traditionally, it would involve the lender or a surveyor coming to the property in question to compile a short report. However, most often banks will opt to use online sales data in combination with a brief look at the exterior of the property and the area. The Royal Institute of Chartered Surveyors found out the method used depends on your lender’s appetite for risk in their investments. An example would be, if the house is built out of a non-standard material such as concrete then the lender might instruct a surveyor to visit the property. However, as the valuation proceeds, the lender will still use the surveyor’s professional opinion to decide what loans they can offer you for the property.
What happens after the mortgage valuation?
Once the mortgage valuation report has been compiled, the surveyor will give their opinion on the value of the property in question. If that assessment matches or is in the same area as the sales price then the lender will usually offer the mortgage that was requested. If the value of the home is assessed to be less than the sale price then this can lead to the mortgage being ‘down-valued’. To avoid this it is advisable that a full property valuation is conducted as well as having a mortgage valuation for the property.
What happens if the property is ‘down valued’?
If the mortgage you have requested is down-valued then the first thing you will want to do is contact your Estate Agent who may need to renegotiate the price of the property. If your mortgage valuation shows that a property is valued at less than the sale price then other lends will tend to agree. This means that it might be beneficial for the seller to agree to a lower price as it’s unlikely that other lenders will agree to the original price. You can also challenge a mortgage valuation, however, it is at the discretion of the mortgage lender. These reasons emphasise the need for a full property valuation on a property as they can help sellers avoid situations like this.
We have recommended Mortgage Advisors on exclusive rates should you wish to discuss a mortgage valuation. If you are looking for a professional property valuation please contact us here. You can also get an instant free online valuation by clicking here.