When you buy a property with a mortgage the lender will instruct a surveyor to visit the property to carry out a mortgage valuation.
The valuation advises the lender of the value of a property and of any characteristics of the property, including significant defects, that might affect its value as security for your proposed mortgage. It’s important to remember that the lender’s valuation is not a survey, which would provide more detailed information about the property.
The lender’s valuation involves a brief inspection, takes typically no more than 20 minutes to carry out and should not be confused with a survey. The findings of the valuation are for the benefit of your lender, rather than you.
Learn more in our Property Survey Guide.
WHAT IS A LENDER’S VALUATION?
A lender’s valuation is a property inspection undertaken as part of your mortgage application. It’s to help your mortgage provider establish the property’s value, relative to the sales price. The lender will want to know if the property is valuable enough to secure your loan against. This is an essential factor in whether your mortgage application is approved.
Though you may pay for the report, you may not get a copy or even see what the surveyor has written. The valuation is based on the surveyor’s knowledge of comparable prices in the locality. It may also give a minimum reinstatement value, which is the amount of money it would take to completely rebuild the property, should it ever be necessary. This is often used as a rebuilding cost for buildings insurance.
Do you have to have home insurance with a mortgage?
HOW DO YOU GET A LENDER’S VALUATION?
Your mortgage provider will automatically appoint a surveyor to conduct the valuation. After inspecting the property, the surveyor will provide a short report to the mortgage provider, identifying any major issues that would reduce the property’s value.
This step in the mortgage application process usually takes about two weeks from application.
Do you need a survey to get a mortgage?
Who organises a survey when buying a house?
HOW MUCH DOES IT COST TO GET A LENDER’S VALUATION?
Some mortgage providers will arrange your lender’s valuation for free. Others may charge the borrower, with the cost calculated on the value of the property. The higher the property price/value, the higher the fee.
You can check your Key Facts Illustration (mortgage quote) to see how much you’ll be charged for yours or ask your broker.
WHAT WILL THE SURVEYOR LOOK AT?
This depends on the surveyor and the type of valuation they provide, but they might look at:
- The type of property (e.g. cottage or high-rise flat)
- The condition of the property (by visiting or driving by)
- Sales data of similar properties in the area
The surveyor will not always need to physically visit the property or even look inside!
WHAT WON’T THE SURVEYOR LOOK AT?
A lender’s valuation isn’t a full survey, so it doesn’t include:
- A detailed inspection
- A full inventory of issues uncovered
- Advice on repairs
- Service checks on gas, electricity and water
- Any problems that affect the buyer but not the mortgage provider
WHAT WILL YOU FIND OUT FROM A LENDER’S VALUATION?
The lender’s valuation is only intended for use by your mortgage provider, so you may not receive a copy of the report, and you won’t necessarily know which issues have been identified.
If your mortgage application is refused based on the lender’s valuation, your mortgage provider will usually tell you why. You’ll also find out if the surveyor believes your property is overpriced. Bear in mind that lender’s valuations can be lower than the sales price you’ve agreed with the seller, as surveyors can be more cautious than buyers about potential issues.
WHAT COULD AFFECT YOUR MORTGAGE APPLICATION?
Your mortgage application could be refused if the lender’s valuation finds that the property is worth much less that the agreed sale price.
Reasons for this include if the property is:
- Poorly constructed or maintained
- Non-standard construction
- In poor condition relative to its age
- Underpinned due to subsidence
- In a high-risk flood zone or area prone to coastal erosion
- In higher risk location, such as flat above a shop
- A leasehold property with a lease nearing expiry
Alternatively, the surveyor may identify something that needs to be fixed before the amount you have applied for can be approved. This is known as a mortgage retention and it will be included within your mortgage offer.
WHAT CAN YOU DO IF YOUR MORTGAGE APPLICATION IS REFUSED BECAUSE OF THE LENDER’S VALUATION?
Firstly, you’ll need to find out why the lender’s valuation was lower than the sales price, so ask your mortgage provider if they can explain.
You might decide that their reasons are valid, and you don’t want to buy the property.
If you still want to buy the property, you could try to renegotiate the sale with the owner at a lower price, and then approach the mortgage provider again. Or, you could ask if the owner is willing to fix any problems identified.
In the long run, you might be glad your mortgage application was refused, as lender’s valuations can uncover problems you didn’t see yourself. It may just be another step in the journey to your dream home.
