What is a Mortgage Valuation and How Does it Work?


If you are applying for a mortgage to buy your new home, you need to know about the valuation survey your lender will carry out to check that the property is worth the price you’ve agreed to pay.

According to the website This is Money, UK, house sales are being stalled because down-valuations by mortgage lenders are applying the brakes to surging property prices. Intense demand in the market for the right properties, and a shortage of supply, has led to so-called bidding wars for the most desirable properties. For anyone looking to pay above the asking price to secure their dream home, and who needs a mortgage to do so, it is worth understanding the mortgage value report.

What is a mortgage value report?

A mortgage valuation is a check by your lender that your home is worth the amount you are paying for it, to ensure it provides enough security for your loan. You may also need a mortgage valuation if you are looking to remortgage. The information is useful to you too, as a buyer, but only in terms of the value of your property – it can in no way be a replacement for a professional building survey.

How does a mortgage valuation work?

Your lender will instruct a Royal Institute of Chartered Surveyors (RICS) valuer to visit the property (the traditional way) or make an assessment based on recent sales data. The method they opt for will depend upon your property and factors such as whether there’s anything unusual about it that needs an in-person visit as well as reviewing comparable data about prices of homes that have sold in your area.

Your lender’s decision on your loan will depend on the surveyor’s opinion of the property’s value. If they agree with the sale price, your lender is likely to offer you the loan you require.

Are mortgage valuations the same as property surveys?

No, they do not give you enough information on the condition of the property. A home buyer’s report or full structural survey is needed to understand any possible problems with the property before you buy.

How much does a mortgage valuation cost?

Mortgage valuations can cost anything between £400 and £1,500 depending on the price of the property, although some lenders offer them for free as a perk to new borrowers.

What if the surveyor doesn’t agree with the price I am paying?

If, after a mortgage valuation, the surveyor thinks the price you are paying is more than the property is worth, this is called a ‘down valuation’. A down valuation could lead to a revised mortgage offer, which might leave you with a shortfall you can’t meet, leading to your purchase falling through.

How common are down valuations?

As many as a fifth of mortgage valuations could be below the agreed price. However, a recent poll of surveyors featured on the Property Reporter website found that only a small proportion believe down valuations to be very common in 2022.

According to the Royal Institution of Chartered Surveyors (Rics) its members are careful to produce an accurate valuation that they can back up.

What if my property has been down-valued?

If you want to go ahead with the purchase, begin by trying to renegotiate the sale price with your seller. If you are both part of a chain, they may be flexible to keep everything moving and secure their own purchase.

If this doesn’t work, you may need to make up the shortfall yourself, if you can. For this reason, buyers are often advised to pull together a hefty deposit with flexibility to allow for a smaller loan.

If this isn’t possible you can challenge the valuation, by showing evidence that in the current market your purchase is worth the money you have offered. Accepting your challenge on the valuation is at the discretion of the lender.

You may also be able to switch to a different lender, which may give a valuation closer to the sale price.

What can I do to avoid a down valuation?

Begin by researching carefully local property sales data to understand how much comparable homes are selling for. If there’s anything unusual about the home you’re buying, look for a specialist lender with experience of this type of property.

If you’re a seller keen to avoid your transaction falling through because of a down valuation, it’s important to price your home realistically in the first place. Getting at least three valuations from local agents as well as doing your own research on local house prices will help.

If you’re looking to buy or sell in south west London, talk to us. Our experience of the local market can help you navigate the current market, avoiding the pitfalls along the way.