What To Expect From a Property Valuation

22 July 2022

Shirley Mushet, ESPC independent mortgage adviser, has given us her insight into what lenders take into consideration within the valuation process. Currently, we are experiencing a buoyant market, where properties are often selling more than their Home Report valuation. 

First, consider the Home Report valuation. A lender will only lend up to the Home Report valuation, and not what you have paid for the property. If you choose to offer more than this, you need to account for it within your own funds. Equally, if you manage to purchase for below the valuation, the lender will use the purchase price rather than the Home Report valuation for the mortgage offer.

So, how does this work? For example, if a property has a Home Report valuation of £200,000 and is purchased for that exact amount. The buyers deposit will be £20,000 (excluding any fees). In this case, they could be offered a 90% loan to value mortgage, with the 10% deposit. 

If you pay £210,000 for the same property, you will need to supply the £10,000 over the Home Report valuation, which means, you are then left with a £10,000 or 5% deposit and as such, are looking for a 95% loan to value mortgage. 

If you are fortunate enough to pay under the Home Report value, the lender will use the purchase price as the value, NOT the Home Report value. In the above example, if an offer of £190,000 was accepted, this becomes the value and NOT the £200,000 Home Report valuation. 

However, this isn’t the only element considered by lenders when considering a mortgage application. Bear in mind that all lenders differ on the type of property they want to lend money on. They want to know the property they are mortgaging is desirable (resaleability) and each lender has different views on this.

What do lenders look for in a property?

Firstly, it must be habitable which generally means wind and watertight with a working kitchen and bathroom. Lenders tend to also have individual views on the construction of a property and whether it is something for them, such as; flats, roofs, multi storey blocks, steel frames, concrete construction and other non-traditional construction types. Furthermore, lenders will also have differing views on properties above or adjacent to commercial premises.

The property’s condition can also cause concern for a lender. For example, if a property is showing signs of structural damage, damp or infestation they may want a specialist report undertaken and could decide to retain money until work is carried out or, they could decide to not lend at all.