Mortgage Valuation Options

Mortgages and options for valuing your property

When you purchase a property using a mortgage, the lender will want to ensure that the property is suitable security for the loan. Equally, as the purchaser, you will want to ensure that the property is worth what you intend to pay for it and that there are no major problems with the building. Therefore, as part of the process, the lender will look to see the results of a valuation report on the property. In England, Wales and Northern Ireland the valuation is arranged through the lender during the mortgage application process.

In Scotland, the valuation will already have been carried out before the mortgage application process starts and will be on file.

Mortgage Valuation Options

When arranging your valuation, there are three types of valuation available, standard valuation for mortgage lending purposes only, a home buyers report, or a full building or structural survey.

1. Mortgage Valuation for Lender's purposes

The mortgage valuation is carried out for the lender's purposes only, and this means that the lender is only interested in the property as being suitable security to lend.
Any problems with the property may not be picked up and reported unless they are major, such as evidence of structural movement.

Therefore, if you arrange a valuation for mortgage purposes only, you are not providing yourself with any information to assist your decision when buying the property.

2. Home Buyers Report

For extra protection, many buyers therefore choose the Home Buyers report option.
With a Homebuyers Report, in addition to providing the valuation for mortgage purposes, the buyer will receive a written report on the condition of all the major structural elements of the property.

In a typical Home Buyers report, you can expect that the heating and plumbing systems, electrical system, drainage, roofing, walls and floors, are inspected.

The work is carried out by a qualified surveyor, and if you later find there is a problem with the property, you have recourse to the surveyor.

Homebuyer Reports are suitable for:

• Properties under 100 years old
• Standard construction - brick and slate or brick and tile
• Properties in apparently sound condition.

3. Full building survey or full structural survey

For unusual properties or those in particularly poor condition, clients sometimes use the Full Building, or Structural Survey.

Lenders can sometimes arrange these on your behalf, but if they do, they are frequently more expensive than a survey arranged directly by the clients.
For this reason, clients using a full structural survey will normally arrange the standard mortgage valuation only through the lender and make their own arrangements for further surveys.

In a full structural survey report, all items of the property are checked, carpets and floorings lifted, subfloors inspected where possible, and anything unusual in terms of construction or condition is investigated in more depth.

Full surveys should be considered for:

• Properties over 100 years old.
• Period style properties - Edwardian, Victorian, Georgian.
• Extensively converted or extended buildings
• Properties in a poor state of repair.
• Anything that is not standard construction i.e. brick wall, with slate or titled roof.

Other specialised property reports

Whichever type of valuation you may request, there may be items picked up such that further reports are requested from the lender.

Examples of this are:

• Mining report - which covers details of any mining that has been done in the area.
• Timber and damp report - which is used when any dampness or rot is discovered in the property.
• Drainage report - which is requested if it appears that the drains are damaged, blocked, or in a poor state of repair.
• Knotweed report - report on the presence of the invasive and destructive plant, Japanese Knotweed (reynoutria japonica).

If there is a problem with the property

If a property is found to be unsuitable as security, the lender may refuse to lend on it.

If the valuation of the property is considered lower than the purchase price, it may result in a reduced mortgage offer.

Sometimes, where there is remedial work to be done, the lender will put in place what is termed a retention clause.

Under a retention clause, the lender holds back a specified sum of money until certain remedial works have been completed, and the property re-inspected to the valuer's satisfaction.

The valuation process protects both the lender and the purchaser from expensive mistakes. If, as a result of your valuation, any problems are highlighted with your intended property, you should think very carefully before proceeding.

Valuation costs

Costs of valuations vary with lender and size of purchase price. Some reports for mortgage purposes only are free of charge, those that are charged by the lender typically cost from two hundred pounds.

A Homebuyers report will probably cost upwards of four hundred pounds.

A Structural Survey will probably cost no less than seven hundred and fifty pounds.