A remortgage valuation is when your lender (either your current one or a new one) checks that your property is worth what you say it is before approving you for a new mortgage deal.
Just like when you took out your mortgage the first time around, a property valuation for your remortgage isn’t really for your benefit – it’s for the benefit of the lender. In that way it’s different from a home buyers survey, which is designed to show you problems with the property before you buy.
They want to make sure your property is worth enough as a security for the loan they’re about to offer you. Or, put more simply, they want to know that if you fail to keep up with your repayments, they can repossess your home and sell it to get their money back.
Your remortgage valuation will show you your current loan to value (LTV) ratio. Your LTV is the size of your mortgage compared to your property’s value. So if your home is worth £200k and your outstanding mortgage is £150k, your LTV is 75%. In general, the lower your LTV, the lower your interest rate – and the wider your choice of mortgage deals.
Read more: How does remortgaging work? Fully explained
There are a couple of different ways that lenders carry out property valuations.
Either a qualified surveyor will visit your property and put together a short report, or they do what’s called a “desktop valuation”. This is when they use recent sales data for similar, nearby properties to calculate the value of your property. Sometimes, the surveyor will hop in their car for a quick “drive-by” valuation, which just involves looking at the property from outside.
The lender will choose what kind of survey you get, usually based on how risky they think your property might be. For example, if you’re remortgaging an unusual property with, say, a thatched roof – or one that’s built with a non-standard material like concrete – your lender will probably send someone out to do an in-person survey.
They may also opt for a physical survey if they haven’t lent in your area before, or if there’s not a lot of up-to-date info about the area online. Having said that, many lenders now offer free valuations as an incentive for new customers, which means it’s less likely you’ll have a surveyor knocking at your door – desktop valuations are faster and cheaper for the lender.
The cost of the valuation is usually based on the size and value of your property, and fees can range from £250 to £1,500. You’ll be expected to pay for the valuation yourself. That is, unless you’re getting one for free as part of your remortgage deal, which is actually quite a common offer.
A valuation isn’t the same as home buyers survey – an in depth report on the condition of the property, designed to help the buyer. Your remortgage valuation is designed for the lender’s benefit, rather than yours. It’s a short report, often only 2 to 3 pages long, and it won’t flag up any repairs or maintenance you might need to know about. It also means you probably won’t get to see it, although you can ask. Some lenders share it, some don’t.
No matter what kind of valuation your lender gets, be it desktop or in person, they’ll base their decision to lend on the surveyor’s expert opinion. If the surveyor agrees with the property value on your mortgage application, the lender is more likely to offer you the amount you’ve asked to borrow.
But sometimes, the surveyor can disagree with your assessment of the property value. Here’s what happens then.
If the surveyor decides that your property is worth less than what you think it is, that’s called a “down valuation.”
A down valuation can be particularly annoying if you’re remortgaging to unlock some of the money tied up in your property for home improvements or renovations.
Here’s an example with numbers. Let’s say you think your home is worth £220k and your mortgage is £150k. That would put your equity (the amount you own debt-free) at £70k. To access some of that money, you could increase your mortgage to £170k and borrow £20k for whatever you need.
But, if the surveyor disagrees with your valuation and instead decides your home is only worth £200k, this reduces your equity to £50k. You could still borrow the £170k (if you meet your lender’s affordability criteria), but this would increase your loan to value, resulting in a higher interest rate and even higher monthly repayments.
Read more: Remortgaging to release equity (borrow more money)
You can try, but it can be tricky. It’s up to the lender whether or not they’ll accept an appeal from you
If they do, you’ll have to produce solid evidence to back your initial valuation. You’ll need to submit at least three examples of similar, nearby properties that have recently sold for a price close to the property value on your mortgage application. You can’t use properties currently on the market, only sold properties.
A mortgage broker, like Habito, can help you deal with your lender if you’re faced with a down valuation. And if there’s no changing their mind, a broker can find you an alternative lender – one who may come back with a more favourable valuation.
If you’re applying for a remortgage and you don’t want to get stung by a down valuation, avoid plucking a figure from thin air for your application. A little bit of homework can go a long way.
Start by visiting Rightmove and/or Zoopla. Simply plug in your postcode, and, presto, you’ll get an average sales price for properties in your area. It’s best to base your valuation on sales within the last 3-6 months, as this more closely reflects the market value.
You can also keep an eye on property price trends in general. Bookmark the government’s property price trends website and see how much similar properties are selling for up and down the country.
There’s no guarantee that your own desktop research will match a surveyor’s, but it should get you closer to an accurate remortgage valuation for your application. And that will save you from any nasty surprises further down the road.
Are you ready to remortgage? Once you’ve got an idea of your property’s value, punch that number into our remortgage calculator and see how much you could save.
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