Do I need a home survey or mortgage valuation?
Home survey or mortgage valuation?
A question on the lips of many a home buyer. Let’s clear things up with a brief explanation before looking further into the two:
In short, a home survey is an inspection of the structural integrity and safety of a property and a mortgage valuation is an assessment of its value.
What is a mortgage valuation?
The mortgage valuation (or lender’s valuation as it’s otherwise known) serves as confirmation that the property is actually worth what’s being asked of it. This validates the mortgage amount and is therefore essential for all homes that are going to be mortgaged.
The mortgage valuation will take into account the property’s size, location, number of bedrooms and bathrooms, unique features, construction, and potential for development. Basically, everything that makes it worth what it is.
Following the mortgage valuation, if the property’s value turns out to be as expected, the lender should (all being well) lend you the full amount.
If, however, the property ends up being worth less than the asking price this results in what is sometimes referred to as a ‘down valuation’. This means that the lender will then only be prepared to lend you what the property is actually worth, not what the seller is asking. With the astronomical increases in interest rates, down valuations are becoming increasingly common so it’s worth being aware of them.
It could mean you have a shortfall to pick up on or the deal is not for you. Before you decide to scrap that deal though and hunt out your next one out, you could use the mortgage valuation as a lever to bargain the asking price with the seller. Or you could try a different lender altogether who may value the property as closer to the asking price.
What is a home survey?
Whatever the value of a property, a home survey is always advisable on a house you’re thinking of buying. It’s your piece of mind, after all, that you’re investing in something sound that doesn’t need a lot of work doing to it.
The home survey is a lot more in-depth than the mortgage valuation, taking into account structural integrity, legal and environmental issues, dampness, insulation, roofing, drainage issues and much more.
It involves a surveyor of your choice visiting the property and doing a visual inspection to give a general overview of the property’s condition. You’ll get a detailed report telling you all about any issues found and, as with the mortgage valuation, you can use the results to leverage a reduction in price, if necessary.
Key points to take away
- The home survey is for the benefit of the buyer, the mortgage valuation is for the benefit of the lender.
- The mortgage valuation is essential, the home survey is not though it is highly advisable.
- Both the home survey and the mortgage valuation can indicate what the property is worth but the home survey provides much more than just a valuation.
- The mortgage valuation is often undertaken remotely as the lender is usually able to source all the information they need online, whereas the home survey involves a detailed in-person inspection.
- Both the mortgage valuation and home survey can be used as a bargaining tool if necessary to ensure the buyer is paying a fair price.
- The lender chooses who is going to do the mortgage valuation, and you, as a home buyer, get to choose who will do your home survey.
Read more about what a surveyor will investigate during a home survey.
Picture credits: header image by Nina Kitaeva, toy house by Towfiqu barbhuiya, house with garden by Abby Rurenko all on Unsplash.