What Is The Role Of a Mortgage Valuation and How Does It Work?
The LTV determines the mortgage rates available to you. It’s important to remember that a mortgage valuation is done on behalf of the lender, not on your behalf. The evaluation or valuation of a real estate agent is not the same. The estate agent prepares these to advise the property owner on how much to sell them for.
What does a mortgage valuation survey involve?
Qualified surveyors do mortgage valuation, which are then calculated using an Automated Valuation Model (AVM). It will be coordinated with your lender. The mortgage valuation survey does not even have to visit the property to perform the valuation when they do desktop valuation, and it may be completed quickly – usually within one to two weeks.
The lender will then use the mortgage valuation to evaluate if the property is suitable security for the loan you’ve applied for. A valuation and a mortgage loan decision are made solely. The lender will normally issue you a mortgage offer once they are satisfied with both.
A mortgage valuation survey will include an estimated or potential rental value based on the area’s achieved rentals on buy to let homes. It helps the lender to calculate the lending amount or LTV ratio.
What information might a mortgage lender require from you?
#1 – Structural Defects Warranty (SDW):
If the property is under 10 years old or has been completely renovated or converted, a lender may request a Structural Defects Warranty (SDW). The developer or the original homeowner gives or purchases an SDW. They are designed to cover the costs of repairing or repairs in new structures due to structural problems.
#2 – External Wall System (EWS1) Form:
Following a fire safety inspection of the building’s exterior wall system, such as cladding, an EWS1 form is completed by a qualified professional following government guidelines.
If an EWS1 form is required, the mortgage valuation surveyor will let you know. The building owner usually acquires the EWS1 form, and if one isn’t provided, a mortgage application may be declined.
What happens if the mortgage is worth less than the property?
A property’s worth may be lower than predicted. A ‘down valuation’ occurs when it affects the quantity of money you can borrow or the rates you can get.
The amount of money that the mortgage lender is ready to lend you may be reduced. It’s also possible that you won’t be able to secure the same interest rate due to change in LTV.
What is a property survey?
A mortgage valuation survey would report on the condition and, in some cases, the market value for you, but a mortgage valuation gives the lender the property’s value.
When buying a home, it’s good to have a property survey done on your behalf to identify potential issues.
Depending on how much information you require, you can select the following report types:
- The most basic sort of survey is the RICS Condition Report.
- RICS HomeBuyer Report — a more thorough examination of the
- property’s interior and outside.
- The most comprehensive type of survey is a building or full structural survey.
In Scotland, buyers can also ask the seller for a free Home Report, including an energy performance certificate, a house survey, and a questionnaire.
Some lenders may require specialised reports depending on the property’s age and condition, for example, inspections of wet, timber, or drains.
Things to keep in mind:
When buying a home, you should not depend on a mortgage valuation.
A mortgage valuation is based on a limited inspection of the property, and in some cases, only a “desktop” evaluation is completed without a physical inspection. The report is also just for the lender’s mortgage. It’s a good idea to get a property survey done on your behalf.
It will report on the property’s condition for you and make you aware of any essential and potentially costly repairs required.
Lenders have their own set of criteria.
Some properties may fall short of your lender’s criteria for mortgage security. For example, homes made of non-standard materials such as prefabricated concrete or wood. Without a professional value assessment, it will not always be possible to tell if a property building fits the requirements.
If an insured risk damages your home, buildings insurance might cover the cost of repairing or replacing it. When you exchange contracts or remortgage, you’ll need building insurance. However, you can work with any provider you want.