What is a Mortgage Valuation?

by:

Caragh Bailey

Updated:

05/06/2019

Read by:

61

9 min read

A mortgage valuation is obtained during a mortgage application process.

Most people think that it is a full structural survey because it costs so much, however a mortgage valuation Survey is not a structural survey.

This valuation is commissioned by the lender and paid for by you and is simply about confirming the value of the property.

This is important to know because it is unlikely that you will ever get a copy of it because the RICS surveyor is working for the lender, not you.

Mortgage lenders advise you to get your own defect survey

In the conditions which accompanied one prominent lender's valuation, a relevant paragraph said:

"We have carried out a valuation of the property, which is for lending purposes only. We use physical inspections or automated valuations to obtain a property valuation."

We strongly recommend that you obtain an independent property survey to satisfy yourself of the property's condition and value."

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We recommend that you order a survey for yourself, completely separate from your mortgage lender, either a RICS HomeBuyer Report, if your property is under 70 years old and of standard construction, or a Building Survey, if your property is over 70 years old or non-standard. Read on to find out more about your lender's mortgage valuation.

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So what exactly is a Mortgage Valuation?

A mortgage valuation is the middle stage of the 3 stage mortgage process (Read our complete guide on getting a mortgage here) and the work is undertaken by a Royal Institute of Chartered Surveyors (RICS) valuer instructed by the mortgage lender.

Although in most cases the valuation is paid for by you, it is in fact completed on behalf of the mortgage lender.

The objective of a the valuation is to confirm the amount offered by you is a fair market value for the property; the bank wants to ensure that if they need to repossess the property, that they can sell it again quickly on the open market and be able to clear their mortgage charge.

It is often the case that the Surveyor undervalues a property, as they aren't comfortable with the price offered as it doesn't match the current market value for comparable properties sold within the last 6 months.

What is a Mortgage Valuation? Mortgage Valuation Example

A mortgage valuation flags certain defects within a property that the Surveyor feels could affect the property's value, however this is not a detailed defect report.

This is why home buyers need to obtain a comprehensive assessment of their property via a Building Survey or a HomeBuyer Report. (Read about the difference between a Building Survey and a HomeBuyer Report here).

Does a mortgage valuation report on defects?

You cannot rely on it to do so for your needs as a buyer.

A mortgage valuation is commissioned by the mortgage lender primarily to assess the value of the property.

If the RICS surveyor conducting the the valuation feels the property needs further investigation they will tell the mortgage lender; however they do not give you a report of potential defects.

This is why after a mortgage valuation you could be asked to get another survey.

The level of detail regarding defects is limited to comments regarding the overall condition and any clearly apparent defects.

However, what defects are picked up could stop your mortgage lender from allowing you to get a mortgage without the defects being further researched, or even remedied.

Types of defects and comments that could be noted within your mortgage valuation:

1

Suspicions of or actual Subsidence(continual movement)

"There is a structural movement as suggested by a vertical crack to the side external wall, cracking to external render and by ceiling cracks and by uneven ground flooring. You need to get a structural engineer or chartered building surveyor to make a detailed investigation providing you with a full report identifying the cause, together with the costs of the work necessary to ensure future stability."

"Trees close to the property could cause damage and specialist advice is recommended."

"There is structural movement. You now need to get a structural engineer or chartered building surveyor to make a detailed investigation providing you with a full report identifying the cause, together with the costs of the work necessary to ensure future stability. I cannot give a valuation until I have seen the report."

What to do?

As the report states, you need to get an independent structural engineer or chartered building surveyor to visit the property and provide their opinion and advice on the defect spotted by the mortgage valuer.

It will not suffice to do a Building Survey or a HomeBuyer Report as a RICS surveyor cannot provide this service. Click to find out more about subsidence surveys.

We have structural engineers to inspect for subsidence surveys and we cover London and the Home Counties. For help call 0333 344 3234.

2

Damp

"There is evidence of dampness to ground floor walls and timber in contact may be defective. You should instruct a damp and timber treatment contractor to investigate the full extent and carry out necessary work."

"Sub-floor ventilation is inadequate and may have allowed defects to occur. You should instruct a timber treatment contractor to investigate the full extent and carry out any necessary work."

What to do?

You need to get an independent Damp & Timber specialist to visit the property and provide their opinion and advice on the defect spotted by the mortgage valuer. Much like the subsidence issue, it will not suffice to do a Building Survey or a HomeBuyer Report as a RICS surveyor cannot provide this service. Click to find out more about damp and timber surveys.

We have damp and timber surveyors to inspect for signs of damp. For help call 0333 344 3234.

3

Concrete Built

"The surveyor feels the property is concrete built."

What to do?

You need a structural engineer or chartered building surveyor to conduct an intrusive survey to assess the property to confirm if it was built using concrete.

We have structural engineers to inspect for concrete built property. For help call 0333 344 3234.

4

Short Lease Term

"The surveyor is unaware of the current lease term."

What to do?

If you are buying a leasehold property and there are less than 80 years left on your lease then your mortgage lender is unlikely to grant you a mortgage. Most mortgage lenders prefer longer leases of 80 years or more. Click to find out more about the lease extension process.

We have lease extension specialists to support you in extending your lease. For help call 0333 344 3234.

5

Tree Surgeons Report

“Tree Surgeons Report In the mortgage valuation report the valuer has mentioned that as the property is built on suspected shrinkable subsoil, there is a potential risk of damage to buildings or services caused by trees/vegetation nearby. Although no damage was seen, you must obtain specialist advice from a registered arboriculturalist prior to legal commitment to purchase and implement any recommendations made to ensure that your buildings insurance policy remains unaffected."

What to do?

This isn't a frequently seen comment in a mortgage valuation report however if this is reported then you will need to obtain a report from a local arboriculturalist to report to lender on the effect of the trees/vegetation that are in close proximity to the property. Here is a link to find a local arboriculturalist near you:

https://www.trees.org.uk/Find-a-professional

6

External Cladding

“External cladding was noted to the flat block. The legal adviser should confirm that this is not AMC (Aluminium Composite Material) and also obtain brief details of the actual current cladding system installed. If however this is not possible then a report confirming that the cladding meets the MHCLG testing requirements must be provided."

What to do?

Since the tragic Grenfell Disaster the type of cladding used on blocks of flats has been a very hot topic. Some mortgage lenders won't lend if certain cladding ,such as Aluminium Composite Material, is used. Click to read more on dangerous cladding

How much does a Mortgage Valuation cost?

The valuation report varies in price depending on the mortgage product and also if you are getting a residential mortgage, a buy to let mortgage or a commercial mortgage.

There are some valuations that are included free within the mortgage product, however you should check the mortgage interest rates that apply to these as they can be less favourable than those found with 'paid up front' mortgage surveys.

Where there is a charge, be careful not to add this to your mortgage term otherwise you will end up paying interest on it. Tempting as it is, it is better to pay for your valuation upfront and not to add it onto your mortgage value.

If you pay for a residential mortgage survey, you can expect it to cost anything from £400 to £1,500, although some mortgage lenders include the valuation for free as part of the mortgage product/deal.

Do you need a home buyers survey as well as a Mortgage Valuation?

Yes and for many reasons.

Your mortgage lender instructs a surveyor to carry out your valuation for their own needs, not for yours. The surveyor has a duty of care to the lender - not you.

Spending £400 is a lot of money and you may be thinking that this is enough to spend on surveying the house; however you could be setting yourself up for a fall.

All properties in England are ‘sold as seen’ or in Latin caveat emptor, 'buyer beware'. If you end up buying a property that has damp, subsidence, wood rot, asbestos or infestation, (click on the links to find out more about these defects) you have to bear the cost to fix it with no claim over the seller.

In summary, a mortgage valuation is just a check of your properties value and not a structural assessment.

The surveyor visits your property briefly and will only pick up on major visible defects.

You are therefore always advised to get a HomeBuyer Report or Building Survey (depending on the property) to check the structural condition for any potential faults.

By instructing your own RICS survey, you have a contract between yourself and your surveyor for them to pick up any defects, visible or potential, that fall within the - much wider - scope of the survey during their inspection.

If you are unsure which survey to choose then please read - What is the difference Between a HomeBuyer Report and a Building Survey? or call 0333 344 3234.