What is a Mortgage Valuation?
Buying your first home? You'll likely encounter a mortgage valuation during your mortgage application. Many first-time buyers confuse it with a structural survey (Level 3 Homebuyer's Survey) due to the cost. However, a mortgage valuation survey is not a structural survey.
Although you (the buyer) pay for it, this valuation is commissioned by and conducted solely for the lender to confirm the property's value for their risk assessment. Therefore, you are unlikely to receive a copy of the valuation.
A mortgage valuation doesn't always mean a surveyor attended the property. These are known as desktop valuations and use data to provide a valuation without a physical inspection.
We recommend that you order a survey for yourself, completely separate from your mortgage lender, either a Level 2 Survey (RICS HomeBuyer Report), if your property is under 70 years old and of standard construction, or a Level 3 Survey, if your property is over 70 years old or non-standard.
Is a Mortgage Valuation the same as a survey?
No, a mortgage valuation is different from a survey. While both involve a professional property assessment, they serve distinct purposes and offer different levels of detail. A mortgage valuation is primarily for the lender's benefit, while a survey is for the buyer.
Its primary objective is to confirm that the offered price reflects the property's fair market value. This ensures that if the lender needs to repossess the property, they can recoup their mortgage charge by quickly selling it on the open market.
Although you typically pay for it, a mortgage valuation is conducted on behalf of the mortgage lender, primarily to assess their risk. The valuation focuses on whether the property's value aligns with the loan amount, it is not designed to find hidden defects or potential future problems with the property.
It will flag if a property potentially isn't valued correctly, or has a defect that affects the value of the property, however, it does not provide a detailed defect report.
Surveyors may undervalue a property if they believe the offered price doesn't align with recent comparable property sales within the last six months.
You cannot rely on a Mortgage Valuation to report on defects for your needs as a buyer. We always stress to our clients that they should commission a Level 2 or Level 3 HomeBuyer's survey.
At what stage is a Mortgage Valuation done?
A mortgage valuation is done during the mortgage application process, typically after your offer has been accepted and before the lender approves your mortgage.
It is the middle stage of the 3-stage mortgage process and is conducted by a Royal Institute of Chartered Surveyors (RICS) valuer instructed by your mortgage lender.
How long does a Mortgage Valuation take?
A mortgage valuation is often a relatively quick process, unlike a full detailed structural survey which can take several hours. It's sometimes conducted within minutes via a desktop valuation, or within an hour or so during a physical visit.
Desktop valuations use available data and therefore can miss issues that would be picked up on a physical inspection.
Mortgage lenders advise you to get your own defect survey
The terms and conditions accompanying your lender's valuation report might state:
"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."
Our experienced RICS surveyors are rated excellent on Trustpilot. Get an instant no-obligation quote to make sure you're not buying a money pit.
Mortgage Valuation vs Level 2 Home Survey
Feature | Mortgage Valuation | RICS Level 2 Home Survey |
|---|---|---|
Feature Purpose | Mortgage Valuation Lender's risk assessment, focusing on property's market value. | RICS Level 2 Home Survey Buyer's assessment of the property's overall condition. |
Feature Level of Detail | Mortgage Valuation Limited, primarily focuses on the property's market value, not its condition. | RICS Level 2 Home Survey Detailed visual inspection of the property's condition, including visible and potential defects. |
Feature Defect Identification | Mortgage Valuation May flag major defects that affect property value, but is not designed for detailed defect identification. | RICS Level 2 Home Survey Full visual inspection of all accessible elements of the property, with a detailed report of findings. |
Feature Report | Mortgage Valuation Typically not provided to the buyer, as it's for the lender's use. | RICS Level 2 Home Survey Comprehensive report provided directly to the buyer. |
Feature Speed | Mortgage Valuation Quick, often completed via desktop valuation or a brief physical inspection. | RICS Level 2 Home Survey Takes longer due to the need for a thorough visual inspection. |
Potential defects flagged in a Mortgage Valuation
Damp
- Damp suggests the presence of unwanted moisture, which can lead to rot, mould, and structural damage.
- It can occur due to leaks, rising damp, penetrating damp, or condensation.
- If any of these are flagged or suspected, a damp and timber specialist should investigate the defect spotted by the mortgage valuer to prevent further deterioration.
Cladding
- Concerns about the type or condition of external cladding, especially in light of recent regulations (Grenfell disaster), can affect mortgage approvals.
- Certain cladding materials have been identified as fire hazards (like Aluminium Composite Material), requiring replacement.
- If flagged in the valuation report, a cladding specialist may need to be consulted.
Lease Term Issues (if applicable)
- Short lease terms can affect mortgage eligibility and the property's future value.
- Lenders often require a minimum lease length, typically over 80 years.
- If the lease is too short, you may need to negotiate an extension with the freeholder before proceeding with the purchase.
Tree-Related Issues
- Trees near the property can cause subsidence by drawing moisture from the soil, leading to ground movement.
- They can also cause direct damage to structures through root growth. An arboriculturist may need to assess the risks and recommend appropriate tree management.
- You can find a local arboriculturist here.
Call or send us a message to request a callback or an email answering your queries about our surveys. Our UK-based survey team can help you choose the right level home survey for your property, at no extra charge.
There's no obligation to instruct. We'll make sure you understand your options and provide a free, fixed-fee quote for our best-value survey to meet your needs. No robots, no call centres. Property challenges solved.
Cost of a Mortgage Valuation
The cost of a mortgage valuation varies depending on the lender, the property, and the type of mortgage product you're getting (residential, buy-to-let, commercial etc). Some lenders include it in their mortgage package, while others charge a separate fee.
You can expect to pay anywhere between £250 to £1,500, but it's important to check with your lender about this so you're not surprised when a bill comes through for a mortgage valuation.
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 to your mortgage value.
You can't use your own surveyor to carry out the mortgage valuation. Your mortgage lender will choose the surveyor. You will usually pay this fee upfront, and it is non-refundable, even if your mortgage application is declined or you decide to withdraw from the purchase.
Remember, this valuation is for the lender's benefit. For your own peace of mind and to fully understand the property's condition, you should commission a separate, more detailed survey.
Do you need a HomeBuyers Survey as well as a Mortgage Valuation?
Yes, we strongly recommend that you get a Level 2 or Level 3, completely separate from your mortgage lender. If you don't, you won't know the true condition of the property. The mortgage valuation is for the lender's benefit, not yours.
A mortgage valuation will not look in detail at any aspect of the property. It is not a survey and should not be relied upon as such. It is a limited inspection to check the property is adequate security for the loan.
A RICS Level 2 HomeBuyer Report or a Level 3 Building Survey will provide you detailed information about the property's condition, including any defects or potential problems. This helps you decide on whether to proceed with the purchase and, if so, whether to negotiate the price.
If you choose not to have a survey carried out, you could face unexpected repair costs in the future.
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, you have to bear the cost to fix it with no claim over the seller.
In our recent survey, 16% of homeowners found defects; including 2% who were able to pull out of a bad purchase, 7% who were able to negotiate a better price, and sadly, 7% of homeowners who did not get a survey and discovered defects after the purchase.
12 of the 39 who remembered how much these defects cost to remedy spent over £5,000
Don't burn your money, book a survey.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
