How does a Mortgage Valuation work?

Mortgages & Money

For those of you who are purchasing a home and require a mortgage, the term “mortgage valuation” is likely something you’ve heard before. Understanding how mortgage appraisals work is important for every potential homeowner who wants to buy a home. Mortgage valuations are done by lenders to figure out if a home is worth buying.

A mortgage valuation is similar to a building survey, albeit it is not intended to be a substitute for one. It is used to establish if a property has a market price or not. The lender is also told about anything that could affect the value of the home as a security for a loan, such as serious flaws and/or repairs that need to be done.

In this article, we’ll go through everything you can anticipate from the mortgage valuation process, from the amount of time and cost to the specifics of what surveyors will be looking at and researching.

What Is the Purpose of a Mortgage Valuation?

A mortgage valuation is an important assessment that is requested by a lender to determine the worth of a property and its appropriateness as collateral for a loan. When we think about what your mortgage provider stands to gain from the completion of a mortgage valuation report, we can see why the valuation is important.

As an important part of your mortgage application process, the lender will contact you to discuss the possibility of scheduling a mortgage valuation. The point of this is to do a quick check of the property and see if it’s worth the money you want to pay for it.

While it is true to say that the mortgage valuation is intended to principally benefit the lender, it is still a very useful guide for property buyers to ensure that they are not overpaying for the property, which could later adversely affect their financial position. In other words, it is mutually beneficial for both the lender and the buyer if the asking price is not too much higher than the value of the property.

A common mistake made by homebuyers is equating a mortgage valuation with a structural survey. The two are different and serve different functions. A mortgage valuation’s purpose is to ascertain a property’s value and suitability for security against the lender’s loan. A full structural survey, on the other hand, is done by the buyer and not the lender. Its goal is to look for major flaws in the home.

How long can you expect the valuation to take?

How long the mortgage valuation process takes depends on a variety of factors, such as the level and type of valuation being done. Some types of valuations will take longer compared to others since some take longer to arrange and carry out.

Having said this, you can reasonably expect that a standard valuation inspection can be done in less than half an hour and is straightforward to arrange. A lot of the time, they’re easy to set up and put together, as long as there aren’t any problems on the way.

Some mortgage valuations, however, will entail a much more in-depth Home-Buyer’s Report, which will result in several hours to carry out and as long as two or three days to make arrangements for.

In these timeframes, the lender-approved surveyor will have ample opportunity to walk about the property, do their inspections, and offer preliminary input that will subsequently be used to assist the lender in making a valid judgement about the property’s suitability as security.

A mortgage valuation may suggest that more studies are needed, such as damp, structural, or drainage inspections, all of which are good indicators of how well a home is built.

How does the mortgage valuation process work?

A mortgage valuation process usually involves three stages: 1) the onsite visit, 2) the evaluation of the property, and 3) the end outcome.

According to Jamie Johnson, CEO of FJP Investment, “It is the lender’s responsibility to arrange for a qualified surveyor to visit the property for inspection and evaluation. Typically, this will take about 30 minutes or so, taking relevant notes that the lender will use to make a decision on whether to approve the loan secured on that property.

When it comes to the evaluation process, it is intended to provide the lender with specifics on any possible risks to the home’s mortgage ability. This will be noted in the mortgage appraisal if, for example, the home was built with non-standard materials. This is a higher risk for the lender, so this will be noted. ”

How much can you expect to pay for a valuation?

Naturally, the cost of a mortgage valuation will vary depending on things like the type and size of the property you are looking at buying and what the lender has specially requested in the valuation process. For example, old or listed buildings will require a more in-depth valuation process.

Some buyers, especially first-time buyers or remortgages, may be able to get a free mortgage valuation as part of their mortgage package.

But for all the rest who will have to pay for the valuation to be carried out, they can expect to pay somewhere in the region of between £200 and £1,000, depending on how in-depth the report goes.