What is a Mortgage Valuation?

Written by Martha Lott

14th Jun 2021 (Last updated on 4th Apr 2024) 12 minute read

What is the Mortgage Valuation Process?

Different lenders may conduct mortgage valuations in different ways. Typically, a property surveyor will be hired to visit and inspect the property before compiling a short report. However, it’s also possible that the surveyor will use the latest sales data online to form the report, with a very brief trip to view the property from a distance - this will usually depend on the type, age and location of the property.

It’s important to note that your lender will likely present a list of trusted surveyors for you to choose from, but you may also compare surveying quotes yourself before deciding. All mortgage valuations must be carried out by a qualified and experienced surveyor, one who is regulated by the Royal Institution of Chartered Surveyors (RICS). The inspection itself will last around 15-30-minutes and will typically occur 1-2 weeks after being requested.

Once your mortgage lender receives the report, they will decide if the home is suitable security for the loan. They will consider the surveyor’s professional opinion on the value of the property and come to a conclusion on what size loan you will be offered. The process of organising a mortgage valuation is not a sign of acceptance by your lender - it is still possible for your application to be denied once the inspection is complete.

How Much Does a Mortgage Valuation Cost?

On average, a mortgage valuation can cost around £150-£1,500, depending on the price of the property. The cost will also depend on the mortgage type, for example, whether you’re applying for a residential mortgage, a buy to let mortgage or a commercial mortgage. However, some lenders won’t charge a valuation fee on certain mortgage deals.

What Does a Mortgage Surveyor Look For?

There are many things the surveyor will look for in a mortgage valuation. The surveyor will not look at the condition of the property in depth. Obvious defects, such as damp, could be highlighted but generally, the mortgage valuation is used to value the property and ensure its adequate security for the loan. Some major issues may be noted should they potentially affect the future value of the property. An example of this would be signs of subsidence.

As they are brief and do not provide comprehensive information about the building and its condition, a mortgage valuation will typically last around 15-30 minutes. The resulting value will be based on the surveyor’s local knowledge of comparable prices. A ‘minimum reinstatement value’ may also be included which will portray the amount of money it would take to rebuild the home, should that ever be necessary.

Despite paying for the report, it’s important to highlight that it is unlikely you will receive a copy of it. This is why it’s often advised buyers organise a property survey alongside the valuation, to ensure you understand the building’s condition and overall value.

What is the Difference Between Mortgage Valuations and House Surveys?

Mortgage valuations and house surveys are not the same - they are independent of each other and it’s often advised you organise both to truly understand the condition of the property before buying. Whilst a mortgage valuation includes a brief visit from your RICS surveyor, a house or property survey will be much more thorough and even look at the structural condition of the home. During some valuations, the surveyor will not walk inside the property. You may not even get to see the resulting report despite paying the valuation fee, meaning you won’t always be informed of what the surveyor has found.

However, if you organise a RICS Level 2 (homebuyers survey) or Level 3 (building survey), you should receive the full report and be alerted of any and all defects found before legally committing to the property purchase. Some lenders will offer the choice of organising a mortgage valuation or a valuation and homebuyers report. If you choose to instead opt for the more thorough building survey, it’s important to highlight that this survey does not include a valuation.

If you’re buying a property in Scotland, you can request a free Home Report from the sellers which should contain the property survey, an energy performance certificate and a questionnaire

To highlight the main differences between a mortgage valuation and the property surveys mentioned above, we’ve included a table that describes what is and isn’t included in each report:

What is a Drive-By Valuation?

A ‘drive-by survey’ or ‘drive-by valuation’ refers to the basic inspection a surveyor may carry out without actually entering the building. Some lenders may only require a drive-by valuation when approving a mortgage or when a homeowner is remortgaging. If a buyer is providing most of the funds to purchase the property, the lender may not require a thorough inspection of the home and so they could organise a drive-by valuation.

This means that the surveyor will conduct a basic inspection of the outside of the property and will not step foot inside. Although it is not an in-depth assessment, they will likely highlight any obvious problems with the roof or signs of the walls cracking that could lead to subsidence.

What Happens After a Mortgage Valuation?

First, the surveyor will provide your mortgage lender with the results of the valuation and their professional opinion on the value of the property. If the surveyor agrees on the sale or remortgaging price, then your lender will most likely approve your mortgage application and offer the loan you’ve requested.

However, if the surveyor does not agree and suggests that the price is higher or lower than what the property is actually worth, then the mortgage lender may have to revise your offer. This will possibly delay the purchase.

What Happens if a Valuation is Lower Than the Purchase Price?

When a mortgage valuation states that the purchase price is too high and the property is actually worth less than expected, you have a ‘down valuation’. Depending on the difference between prices, this could affect your mortgage deal and the rates that are available to you.

If this occurs, your mortgage lender could reduce the size of the loan they are willing to lend or you may not be able to borrow at the same interest rate. However, it’s important to note that some lenders will allow you to challenge the outcome of the valuation before deciding on the next steps to take.

Down valuations typically occur when property prices are out of sync with the current housing market trends. For example, if local house prices are falling at a quicker rate compared to other areas, then it might result in a gap between what the estate agent believes the property is worth and the surveyor’s opinion of its market value.

What Happens if a Valuation is Higher Than the Purchase Price?

Having the valuation come in higher than the purchase price is an unlikely occurrence. However, it is possible. If this does occur, you may not be affected as the valuation report should only be sent to your lender who will then decide whether or not to accept your mortgage application.

If the seller discovers that the property is worth more than the asking price, however, then they may try to negotiate and increase the price. Even if they have accepted your offer already, they are not legally bound to the sale until the contracts have been signed and exchanged, making it possible for them to walk away from the transaction.

How Common are Down Valuations?

Down valuations are fairly common and the effect of the COVID-19 pandemic has slightly increased the chances. A survey by Bankrate UK discovered that 46% of prospective buyers saw properties down-valued between March and September 2020 - around 50% of those buyers were aged between 18-34 and 37% were aged 45+. It was calculated that the majority of homes were down-valued by approximately £5,000-10,000.

The data also revealed that location is another key factor, with 63% of properties in Wales being down-valued, only 31% in Scotland and 59% in London. Interestingly, cottages saw the highest proportion of down valuations, closely followed by semi-detached houses.

What Do You Do if Your Property Has Been Down-Valued?

When receiving a down valuation, the first step would be to try and renegotiate the asking price with the seller. Whether the property has been down-valued or the property survey highlighted serious issues, this is the strongest tool to have as a buyer when negotiating the price.

If your mortgage lender agrees and doesn’t think the home is worth the original sale price, it’s more likely that the seller will accept the lower offer as they would probably struggle to find another buyer with a more appealing offer. Some sellers will also want a quick sale, ensuring they accept the latest offer.

However, if the seller isn’t willing to lower the asking price or you’re actually remortgaging a property instead, it would be wise to challenge the valuation if you have evidence that the home is worth more. It is up to the lender to accept this challenge, so if you do not have enough evidence for your case, it’s advised you consider the new loan offer.

If you’re seriously unhappy with the new offer, then your last resort could be to find another mortgage lender with a different independent surveyor. However, it’s highly advised you speak to a professional mortgage broker before deciding which steps to take.

How to Avoid a Down Valuation

Down valuations can often delay an already stressful process for both the buyer and seller. Whether you’re purchasing a new home or remortgaging, there are a number of things you can do to help avoid a down valuation:

1. Research the property - Whether you’re buying or selling, it’s essential you research the property in question. Research the local area and what similar properties sold for over the past 2-6 months. If you’re a buyer, use this information to make a realistic offer.
2. Talk to a professional - There are a number of finance and property experts you should talk to before continuing with the sale, such as a mortgage broker or lender. If you’re selling the home, it’s advised you speak to a variety of local estate agents who are familiar with the area and with the local market activity. If you’re presented with a range of different values for the house, do not choose the highest price, go for a realistic average or middle valuation.
3. Find a suitable lender - Before choosing a mortgage lender, it’s advised you speak to a mortgage broker as they should have access to multiple deals and can recommend the most suitable lenders for you and your situation. This is especially vital if you’re purchasing an unusual or risky property.

Does a Valuation Mean the Mortgage is Approved?

No matter whether it is completed before or after a mortgage offer has been received, having a valuation conducted does not mean your mortgage has been approved. It is part of the process of applying for a mortgage and simply informs the lender whether the property is suitable security for the loan - there are other requirements that you must comply with before being accepted.

How Long Between a Valuation and a Mortgage Offer?

Most lenders will present a mortgage offer a few days after receiving the valuation report. The process could be delayed if they require further information, but typically, it takes around 5 days to receive the report and another week to issue a mortgage offer.

Once they receive the valuation from the surveyor, your lender’s underwriter can begin making the final decision. If you’re presented with a mortgage offer, both you and your conveyancing solicitor should receive copies of it. It can take anywhere between 2-20 days to obtain this.

House Valuations and Remortgaging

Remortgaging refers to the process of replacing your current mortgage deal from one lender to another. You will typically be required to organise a valuation when remortgaging as your new lender will need to be informed whether the home is adequate security for the next loan. This could be a full valuation or a drive-by valuation where the surveyor doesn’t set foot inside the home.

Like any mortgage valuation, this should provide you and the lender with an indication of the property’s current market value. This will then help your lender calculate your new loan to value or LTV, which will determine what rates will be available to you.

Learn More About Mortgages

This has been part of our mortgages and deposits guide. The next article in this series is all about remortgaging. If you're selling your house or just looking for a better deal, read our guide on what is remortgaging.