Why Do Lenders Require a Valuation?
When you remortgage, the new lender needs to confirm that your property is worth enough to secure the loan. The valuation protects the lender by ensuring that if they ever need to repossess and sell the property, they'd be able to recover the mortgage debt.
The valuation also determines your loan-to-value (LTV) ratio, which directly affects the interest rate you're offered. A lower LTV generally means access to better rates, so an accurate valuation is in your interest as well as the lender's.
It's worth noting that a mortgage valuation is not the same as a homebuyer's survey or a full structural survey. It's a basic assessment of the property's market value and condition, primarily for the lender's benefit rather than yours.
How Much Do Valuation Fees Cost?
If you're paying for a valuation yourself, the cost typically depends on the value of your property. For a property worth up to £250,000, expect to pay around £150 to £300. For properties valued between £250,000 and £500,000, the fee usually falls between £250 and £500. Higher-value properties can attract fees of £500 to £1,500 or more.
However, the good news is that many remortgage deals include a free basic valuation as part of the package. Lenders use free valuations as an incentive to attract remortgage business, so you can often avoid this cost entirely by choosing the right deal.
If you're offered a free valuation, it will almost always be a basic desktop or automated valuation. If the lender needs a physical inspection, they may cover this cost or ask you to pay the difference.
Types of Valuation
There are three main types of property valuation used in the remortgage process. A desktop valuation (also called an automated valuation model or AVM) uses data from recent local sales, property records and algorithms to estimate your home's value without anyone visiting the property. These are the cheapest and quickest option.
A drive-by valuation involves a surveyor visiting your area and assessing the property from the outside. They'll check the general condition, location and compare it with similar properties. This provides more accuracy than a desktop valuation but doesn't involve an internal inspection.
A full physical valuation requires a surveyor to visit and inspect the property inside and out. This is the most thorough option and is sometimes required for older, unusual or higher-value properties. It's also the most expensive, but gives the most reliable figure.
What If the Valuation Is Lower Than Expected?
A down-valuation occurs when the surveyor values your property at less than you (or your lender) expected. This can affect your LTV ratio and may mean you don't qualify for the rate you applied for, or in some cases, that the remortgage application is declined.
If your property is down-valued, you have several options. You can accept the lower valuation and proceed at a potentially higher rate. You can challenge the valuation by providing evidence of comparable local sales at higher prices. Or you can try a different lender, as valuations can vary between surveyors and lenders.
To minimise the risk of a down-valuation, ensure your property is well-maintained and presentable if a physical inspection is being carried out. You can also provide the surveyor with details of any improvements you've made that might increase the property's value.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.