what is a mortgage valuation?

What is a mortgage valuation?

What is a mortgage valuation?  When it comes to acquiring properties, valuation is important.

If you are applying for a mortgage loan, your lender will need mortgage valuation or what is also referred to as valuation for mortgage purposes. This is for the benefit of the lender and serves as security to ensure the property you are interested in has no significant damages which can lower the value of the property. Moreover, it ensures your prospective lenders that the property you are buying is worth the amount of money they are parting with.

Mortgage valuations do not take much time. In fact, it only takes between 20-30 minutes to cover all the details to be included in the report which is between two to three pages of written document. Normally, you, the borrower, will not be given a copy of the report by the lender. It also does not include structural issues and repairs that will cost you if and when you purchase the property.  So what is a mortgage valuation and how can it effect you?

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What Do Surveyors Look for in Mortgage Valuations?

Generally, there are two aspects of coming up with mortgage valuations. Building surveyors basically need to answer two questions during inspection. One is if the property being surveyed is worth the amount of loan applied for. The other question is if the structure is durable and strong enough in the coming years.

Mortgage lenders are investing and risking money when they lend to mortgage borrowers. Having said that, it is important for them to ensure the value of the property being mortgaged is worth their investment. Case in point, if a borrower got a mortgage loan amounting to £200,000 for a property that only has a value of £150,000 and the borrower is not able to pay the loan, the lender might not be able to get back the full amount, in case the house will be foreclosed and sold to another buyer. This is why lenders want to ensure that a borrower or buyer is asking them the appropriate loan amount.

In mortgage valuations, condition of the property as well as the type of construction is included in the report. For defects in the property, surveyors will only include the obvious or visible problems of the property in mortgage valuations. As for the damages in the property, the factors included are structural damage, roof and electrical wiring problems as well as issues of dampness in the property. Some surveyors who see other problems other than what will be included in the valuation recommend a detailed report.

Damages to property are visible and more often than not, all these issues will be included in the report, especially if the home you are eyeing has been built decades ago. Although you might not be given a copy of the report, you, the potential buyer can ask questions to the surveyor as the survey is ongoing. These can include information on electrical installation, roof problem, heating system and timber issues. The surveyor might even be willing to give you an idea on how much it will cost to look into other potential problems. A quote from a builder might also come in handy when it comes to negotiating with the seller.

Mortgage Valuation Costs – What is a mortgage valuation fee?

Mortgage loans are sometimes offered by lenders along with free mortgage valuations but generally, borrowers will have the burden of paying for the mortgage valuation cost which runs from £150 to £1,500, depending on the size of the property and its value.

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Why do low mortgage valuations pose challenges?

Since mortgage valuations can affect the decisions of lenders, low mortgage valuations may mean borrowers will be forced to come up with a larger amount of money for deposit. According to reports, people who are most affected with low valuations are those trying to apply for remortgaging their properties rather than those buying properties. However, even if this is the case, there are still options. If the property you plan to apply a loan for mortgage was given a low marking, you can negotiate with the seller or real estate agent for a low asking price for the property or you can look for other properties within area with the same asking price or a bit higher.

How Valuations Matter for Property Sellers

Although mortgage valuations primarily benefit lenders, property sellers should not ignore these reports. If the surveyor hired by the mortgage lender gives your property a lower value than what you expect it to get, your prospective buyer might end up with an approved loan that is basically lower than what he or she expected to receive. If this happens, a problem might arise on the part of the potential buyer regarding the amount he or she will be afford to pay. This is why sellers who put their properties in the market also find this report important.

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Mortgage valuations are not as detailed and thorough as the homebuyer report and a building survey. If the property is in god condition, a homebuyer report will suffice. This will include structural damages. Conversely, a building survey is the most accurate among the three and the most expensive. This type of survey will include checking the interior and exterior aspects of the property. Of the three, mortgage valuation is the most inexpensive and basic when it comes to property surveys.

Do you have anything to add on what is a mortgage valuation?  Can you help customers find the right mortgage valuation for them?  Please leave a comment and help the community.