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House valuation for mortgage

Thomas Miller
31.01.2023
6 min

Did you know you can own a house and complete payment later? Taking a mortgage can help you buy a house today without paying now. In this article, we will discuss house valuation for the mortgage, and address key issues to look out for when taking a mortgage.

Valuation of the house for a mortgage

What is a mortgage?

A mortgage is a type of loan that can assist you in acquiring a property. This property can be a house, land, apartment etc. Averagely, mortgages have a life span of 25 years. However, a mortgage term can be from six (6) months as the minimum term to a maximum of forty (40) years. It involves the paying of monthly sums to offset the mortgage loan contract. 

You may lose your house if you are unable to settle the monthly repayments to cover the initial amount taken. This is because mortgages are secured against the houses or properties bought.

Mortgage firms, bankers and other lenders conduct a house valuation by assessing the house and obtaining the true value of the house. They do this for several reasons, which are explained below. 

House valuation for mortgage purposes

Valuing a house for a mortgage is essential for several reasons. These are outlined below; 

  • Obtain the actual value of the house

Mortgage firms conduct house valuations to ensure that the market or fair value of the house is obtained to determine the loan amount to lend to the customer. This is mandatory to ensure that there are no irregularities in the mortgage industry. 

It guarantees that lenders cannot use mortgages as a source of extra finance for personal use. For example, a lender’s value for a house of £100,000 may be deceitful if an intentional extra value of £25,000 is included. The mortgage lenders conduct their valuation to produce the actual worth of the house.     

  • Ensure the client can pay off the mortgage loan

Mortgages are given by considering the financial strength of the client. Therefore, obtaining the actual worth of the house through valuation provides the surety that the client can pay off the mortgage. 

For example, some salary caps or financial strength cannot afford some type of mortgage even when given the maximum term possible.   

  • Helps to ascertain the best tenure for a mortgage

House valuation helps both the firm and the client to obtain the best and most favourable tenure for loan repayment. It helps the client to choose the tenure that is favourable for his or her financial strength. It must be noted that shorter terms take a huge component of your salary compared to paying longer terms.  

  • Ability to ensure quick resale in case of default 

Mortgage lenders conduct a house appraisal before granting the loan so that overpricing now will not make it difficult for them when reselling in times of default. 

For example, if the actual value of a house is £80,000 now but the bank or lender appraises it to be £160,000, reselling when there is a default will become very difficult. This is because buyers will insist the house is overpriced. 

How to get a house valued for a mortgage?

Mortgage valuation benefits the lenders the most, considering what they stand to lose when valuation goes wrong. You can get a valuation for the mortgage from free online software/self-appraisal, estate agents or certified surveyors.

  • Free online valuation 

Before your lender’s valuation, you can also conduct a free online valuation to have a first idea of the value of a property on the market by using online mortgage calculators. These house estimators ask a few questions about the property for valuation, and then you get the results instantly.

  • Estate agent valuation

Estate agents can also conduct a valuation for mortgages for you. However, the decision on how a house for a mortgage should be valued rests on the lender. This approach also gives you a fair idea of what a certified surveyor will quote. 

  • Certified surveyors valuation 

In the UK, the certified surveyors are the Royal Institution of Chartered Surveyors (RICS). These are registered members that are mostly contracted by bankers to conduct appraisals for mortgages.

What happens during house valuation for a mortgage?

We have discussed what happens when valuing a house for a mortgage in this section. The following processes are considered in house valuation for mortgages. 

  • Exterior inspection 

Appraisers start their work by looking at the exterior features of the house. These will include 

  • the land size, 
  • the overall condition thus paintings, 
  • roofing and cracks, 
  • easy access to automobiles and other moveable objects, 
  • garages availability, 
  • pools,
  •  porches 
  • and other outdoor buildings on the property.     
  • Interior inspection 

The interior inspection includes all the facilities in the house: 

  • rooms, 
  • bedrooms, 
  • kitchen 
  • and bathroom. 

Appraisers evaluate the doors, closets, windows, ceilings, internal walls, fixtures and fittings, electrical and plumbing works, and installed appliance systems. 

While conducting an interior check, appraisers look for remodelled sections in the house.   

  • House construction detail

The type of materials used in the construction of the house adds to the value of the house. Also, the architectural design and type of construction whether usual, traditional or modern play a huge role in concluding the house value.  

While conducting assessments, appraisers keep detailed notes on issues like defects, rots, cracks, faulty wiring and plumbing, pests etc. as these affect the price of the house. They also keep photos of key features.  

Preparing a house for the mortgage valuation

Before a mortgage valuation is conducted, the following must be ensured; 

The appearance of the house must be appealing, thus ensuring a clean environment and proper arrangements of outdoor facilities. 

  • Tidy the interior section 

Aside from the external view, the house must be clean and thus free from 

  • dirt, 
  • stagnant air, 
  • insects, 
  • rots etc. 

You must open your windows after cleaning to ensure fresh air in the interior section of your house. You do not want your property to look and smell stuffy. This can put the valuer off.    

Cost of house valuation for mortgage

Some bankers or mortgage firms charge for valuing a house for the mortgage, while others perform this service for free. However, it must be noted that certified surveyors may charge you £150 and beyond for valuation in the UK depending on the type of house.

House valuation for a mortgage is important the points below summarize some issues about it

  • House valuation for a mortgage is important for lenders or mortgage firms to arrive at the level of risk in granting that loan. 
  • A mortgage valuation is conducted by bankers to assess the fair or market value of the house. 
  • Valuing a house for real worth for a mortgage makes reselling in case of default easier.
  • Mortgage valuation may be conducted for free or at a charge. 

Check also this article about how to get a house valuation for a remortgage.

FAQ

How long does it take to get a mortgage offer after valuation?

While an entire mortgage process from application to offer may take 2 to 4 weeks, the period between valuation and mortgage offer may happen between 2 days to one week depending on the documentation left to fulfill.

After a lender receives the valuation report, all documentation is concluded to reach a final decision on the mortgage.

Can a mortgage be declined after valuation?

Yes, a mortgage can be declined after valuation on several grounds like wrong or illegal documentation, overpriced property, highly risky property portfolio, lack of income to meet instalments, low credit points, and many more.

Lenders may also have thresholds which when breached would mean the client being disqualified.

Is mortgage valuation different from house survey?

A survey involves physically inspecting the house, and addressing current defects and potential issues that will affect the house later. However, a mortgage valuation may be conducted without even visiting the house. Valuers can use house specifications, land coverage and pictures of the house to conclude a value. Therefore, there is a difference between these terminologies.

Is a mortgage valuation enough to say the house is in better condition?

Mortgage valuation may not be enough when it comes to assessing building defects. You may need to conduct a paid survey yourself to be satisfied with the actual state of the house.

What happens if the house price is higher than the mortgage valuation?

The mortgage valuation may be lesser than the price tag of the house. In such a situation, the lender may deny you the total or allow you to add the extra value. This can also change the interest allowed to you.

Thomas Miller
Thomas Miller has been a real estate agent for over 4 years now, when he is not in the field, he is dedicated to his second passion, writing, especially in the real estate market.
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