When you apply to remortgage your lender will carry out a mortgage valuation to confirm the property is worth what you say it is. So how does the process work, how much will it cost and are there any potential pitfalls – and ways to avoid them? This article explains everything you need to know.
How will your house be valued for a remortgage?
Normally the lender will instruct a surveyor to value your home. And there are a couple of different ways they may do this:
- Desktop valuation - this is a computer automated valuation done using recent comparable sales, property data and property listings. It is what it says on the tin: the valuation of the property can be estimated from a desk; without needing to physically visit the property.
- Drive-by valuation - the surveyor will value the property from the outside of the house. The surveyor will usually do a basic inspection of the outside of property looking for major problems on the roof or walls, which could affect the value of the property.
Mortgage valuation vs house survey
A mortgage valuation isn’t the same as a house survey. Typically, when your house is being valued, if the surveyor does visit the property it will be a brief visit for the benefit of the lender. It won’t involve the surveyor actually going into the property and therefore isn’t an accurate report of the condition of the house. You might not even see a copy of the valuation report as it will tend to go straight to the lender.
A home buyer’s report or a full structural survey is a much more detailed report. The surveyor will look at every aspect of the house, inside and outside, to assess the condition of the property and highlight any potential defects with it.
What a lender might need from you
There are a couple of different things that a lender may want to see before processing your remortgage application if you live in a new build or a block of flats:
- Structural Defects Warranty – If you have recently converted or refurbished your home, or live in a new build property, you will normally have a Structural Defects Warranty. Also known as Latent Defects Insurance, it protects against defects and the potential cost of rebuilding and rectifying any defects that arise.
- External Wall System Form – if you live in a block of flats in a building over 18m tall you might need to present your lender with the External Wall System form (EMS1). The form was created to ensure residential buildings over 18m tall could be assessed for safety. However not every building will need an EWS1 form so it’s best to check with your lender.
How much does it cost to get your property valued?
The cost of a mortgage valuation is usually based on the price of the property and could be anywhere between £150 and £1,500 according to Money Helper. However some remortgage deals will offer a free valuation.
What happens after valuation?
After a valuation the surveyor will contact the lender directly and give them their opinion. If they agree with the remortgage value then the lender is likely to process the new mortgage.
However if the surveyor decides that the property is worth less than the proposed remortgage you might get a ‘down valuation’. This could lead to your bank giving you a revised mortgage offer and could put your plans on hold.
Down valuations are more common than you might think: one in five homes in the UK are being down-valued by lenders (Emoov, 2018). They tend to happen when house prices are out of sync with the current market trend. This can happen when house prices are falling faster than they are in other areas, meaning that there is a gap between what estate agents believe a property to be worth and a surveyor’s opinion.
You may be able to challenge the lender’s valuation if you have robust evidence that the property is worth the amount you said it was. However the lender has to accept the challenge on the valuation in order for it to proceed.
If you don’t have the evidence, you could potentially accept the new loan offer and try to make up the shortfall through other means. This normally isn’t a viable option for most, so the alternative would be to try a different lender that uses a different surveyor, which could give a valuation closer to the original price.
So how can you avoid a down valuation?
There are steps you can take to try to avoid a down valuation. These include:
- Researching the property’s value thoroughly – using sites like Zoopla can help you see what your property’s price timeline has been but also what it is most likely to be worth today based on the property trends in your area. You can also see what other houses have sold for around you to get a good estimate.
- Get an expert opinion – even though you’re looking to remortgage you could invite a few local estate agents to give their expert opinion. From these different valuations you’ll be able to take the average as a good price to go off.
- Check with your lender – if you’re staying with the same lender, they might have the property value on file.
- Make home repairs – making those small repairs to your home could make all the difference when getting your home valued. Even if it’s just replacing a few roof tiles or sorting out the guttering, it might make a difference to the surveyor’s report.
- Enlist the help of a mortgage adviser – a mortgage adviser will be able to help you get all the documentation together that you will need for your remortgage application and will also help you find out how much you can borrow. Here at Resi, our expert mortgage advisers are here to help you find the right mortgage for you. We have access to thousands of mortgage products from over 90 different lenders.
If you have any other questions, or want to talk to one of our advisers, feel free to get in touch today.
You may have to pay an early repayment charge to your existing lender if you remortgage. Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% pf the amount borrowed