How will the mortgage lender value my property?

Whether you’re purchasing a new property or remortgaging your current home, a mortgage lender will always need to work out the ‘value’ of the property so that they can agree on the deal they will offer you.

Your mortgage lender will also use a valuation to determine that the property is in an acceptable condition for them to agree to mortgage, therefore the ‘valuation’ aspect of a mortgage application really is a pivotal event.

In order to understand how a mortgage lender will value your property it’s good to understand the different types of valuations available and when they’re typically used. The following guide should help you to break through the jargon to understand the different methods of valuing a property in the UK:

1.     Market appraisal: This is a free valuation offered by estate agents, which provides an estimate of the property's current market value. It is typically based on the agent's knowledge of the local property market and recent sales data. This will give you an idea of what your property is worth, but a mortgage lender will not take this in to consideration.

2.     Comparative market analysis or a ‘Desktop Valuation’: This is a detailed analysis of the local property market and recent sales data, which is used to determine the property's market value. It is often conducted by valuation specialists who are working on behalf of the lender. It is typically less detailed than a full valuation but can be a cost-effective option for a lender and is typically used when the Loan to Value is at the lower end of the scale.

3.     Lender’s basic valuation: This is a basic valuation of the property, conducted by a qualified surveyor or valuer. It includes an inspection of the property and considers factors such as the property's condition, location, and potential for development. This is often required for mortgage purposes and some lenders will offer this as a free option, however it is not a comprehensive valuation and will not identify all potential issues.

4.     Home Buyer’s report: This can usually be added on to the mortgage valuation at an additional cost, and typically includes an assessment of the property's condition, including any defects or issues that need to be addressed. This may include issues such as damp, rot, subsidence, and structural problems, as well as a range of other issues that could affect the value or safety of the property, however is not a full survey of the property, and may not identify all potential issues or defects.

5.     Full structural survey: also known as a building survey, is a type of property survey that is commonly used in the UK. It is a comprehensive survey that is carried out by a qualified surveyor and is designed to provide a detailed assessment of the condition of a property. The survey includes a thorough inspection of the property, both inside and out, and typically takes several hours to complete. The surveyor will examine the structure of the property, including the walls, roof, floors, and foundations, and will identify any defects or issues that need to be addressed.

It is important to note that the accuracy of a property valuation will depend on a range of factors, including the type of valuation, the experience of the valuer, and the current state of the property market. Discuss your needs with your mortgage broker before you start the application process to make sure you get the information you want from your valuation.