Applying for a mortgage often brings a mixture of excitement and anxiety.
While you’re looking forward to securing your dream home, you might worry about whether the mortgage company will agree with the price you’ve agreed to pay.
Property valuation can sometimes feel like a mysterious black box – something that happens behind the scenes but can make or break your house purchase.
Many homebuyers are caught out when a property is valued lower than expected as this can reduce how much you can borrow or even increase your deposit requirements at the last minute.
Read on as we explain mortgage valuations and the process of valuing a house.
Behind the Scenes: The Mortgage Valuation Process
A mortgage valuation is an assessment carried out on behalf of the mortgage lender to confirm that a property offers adequate security for the loan you’re applying for.
Unlike what many people think, it’s not the same as a house survey.
The valuation exists purely to protect the lender’s interests, making sure they could recover their money by selling the property if you were unable to keep up with repayments.
Many buyers mistake the lender’s valuation for a survey that will highlight issues with the property, but they serve very different purposes. A valuation simply confirms the property’s market value for the lender, not whether it’s a good buy for you.
The mortgage valuation happens after your initial mortgage application is processed.
The lender arranges it once they’ve assessed your financial situation and decided in principle that they’re willing to lend to you. The valuation is one of the final hurdles before receiving a formal mortgage offer.
Read more: A Guide To Property Surveys
From Physical to Digital: How Lenders Value Your Home
Mortgage companies in the UK use several different methods to value properties. The approach they choose often depends on the property type, loan amount, and their own internal policies.
Physical Property Inspections
The traditional approach is a physical inspection where a qualified valuer visits the property.
These usually take just 15-30 minutes – they’re not the thorough examination many buyers expect. The valuer will look at the property’s basic condition, size, and location, making notes that inform their valuation.
During a physical inspection, the valuer checks:
- The general condition of the property
- Room sizes and layout
- Construction type and age
- Any obvious issues that might affect value
Physical valuations cost between £150-£1,500 depending on the property value. Some lenders include this as part of their mortgage package, while others charge separately. These inspections are carried out by RICS (Royal Institution of Chartered Surveyors) qualified valuers who follow professional guidelines.
While in-person valuations are the most thorough option, they’re also the slowest and most expensive. For many straightforward properties, lenders are increasingly turning to faster alternatives.
Desktop Valuations
Desktop valuations have become increasingly common, with UK Finance reporting they accounted for 31% of all mortgage valuations in 2021. As the name suggests, these are done without visiting the property.
For a desktop valuation, the valuer uses:
- Land Registry data
- Previous sale prices
- Comparable property sales
- Local market information
- Online listings and photographs
- Aerial and street view images
These valuations are quicker and cheaper than physical inspections. They’re usually used for remortgages, straightforward properties, or lower loan-to-value applications. The process takes 1-2 days compared to 5-7 days for physical valuations.
Desktop valuations work well for standard properties in areas with plenty of similar sales data, but they can struggle with unique properties or homes that have been extensively renovated.
Automated Valuation Models (AVMs)
At the fastest end of the spectrum are Automated Valuation Models or AVMs.
These computer algorithms analyse property data and market trends to generate an instant valuation.
AVMs use mathematical models to assess:
- Historical property prices
- Recent sales of similar properties
- Location factors and postcode data
- Property characteristics
According to our research, AVMs are now used for approximately 35% of UK mortgage valuations. They’re particularly common for remortgages and lower-risk lending, with most lenders using them for loan-to-value ratios below 60%.
An important feature of AVMs is the confidence score – a rating that indicates how reliable the valuation is likely to be. Lenders usually only accept AVMs with high or very high confidence scores.
AVMs offer speed and cost advantages but lack human judgment and the ability to factor in property-specific features that might add or subtract value.
Through the Valuer’s Eyes: What Makes or Breaks Your Property’s Worth
Whether in person or remotely, valuers consider a range of factors to determine a property’s value. Understanding these can help you see your property through a valuer’s eyes.
Valuers assess properties based on:
- Location factors – The desirability of the area, local amenities, transport links, and school catchments all affect value. A properly priced home in a sought-after location will generally receive a more favourable valuation.
- Comparable properties – Valuers look at what similar properties in the area have sold for recently. These ‘comparables’ provide objective evidence of market value.
- Property size and layout – The usable floor space, number of bedrooms, and practical layout all contribute to the value assessment.
- Age and condition – Newer properties or those in excellent condition may achieve higher valuations than those needing work.
- Construction type – Standard construction methods generally value better than non-standard or unusual building types.
Value-Reducing Issues to Be Aware Of
Certain issues can negatively impact a property’s valuation. Being aware of these helps you anticipate potential problems:
Structural problems like subsidence, significant damp issues, or roof defects can substantially reduce a property’s valuation. These signal expensive repairs that affect the property’s security value.
Non-standard construction types present another challenge. Properties built with materials like concrete panels, steel frames, or timber may be valued lower as they can be harder to mortgage and sell.
For flats, short leases significantly impact value. Leases with less than 80 years remaining begin to lose value exponentially, and those under 60 years can cause serious valuation and mortgage issues.
Environmental factors such as Japanese knotweed, flood risk, or proximity to power lines can also diminish a property’s value in the eyes of a mortgage company.
Certain property types consistently face valuation challenges, including ex-council properties (particularly high-rise flats), properties with flying freeholds, and those affected by cladding issues following the Grenfell tragedy.
On the positive side, recent quality renovations, energy efficiency improvements, and off-street parking can help offset some negative factors, especially if they’re well-documented and comparable to improvements in similar properties that have sold recently.
Related: A guide to the different types of houses in the UK
Understanding Mortgage Retentions
Sometimes a valuer identifies issues that don’t necessarily stop a mortgage but do raise concerns. In these cases, the lender might approve your mortgage with a ‘retention’.
This means they’ll allow you to buy the house but will hold back part of your loan until specific work is completed.
For example, if your £500,000 property needs a new roof estimated at £15,000, the lender might release £485,000 initially and hold back £15,000 until you provide evidence the roof has been replaced. This creates a challenge as you’ll need to fund these repairs yourself before receiving the retained amount.
Common reasons for retentions include:
- Damp problems requiring treatment
- Structural issues needing repair
- Partial rewiring required
- Roof repairs or replacement needed
- Essential modernisation work
Retentions protect the lender by ensuring essential work is completed, but they create cash flow problems for buyers.
If you’re faced with a mortgage retention, you have several options: negotiate with the seller to reduce the price or complete the work, fund the repairs yourself, or seek a specialist renovation mortgage that factors in improvement costs.
When the Numbers Don’t Match
The valuation directly affects how much you can borrow through its impact on the loan-to-value (LTV) ratio. This ratio compares the loan amount to the property’s value, expressed as a percentage.
For example, if you’re buying a house for £500,000 with a £100,000 deposit, you’ll need a £400,000 mortgage. That gives you an LTV of 80%.
But what happens if the lender values the property at £475,000 instead of £500,000? Suddenly, that same £400,000 loan gives you an LTV of 84%.
This shift can have several consequences:
- You might move into a higher LTV band with worse interest rates
- You could exceed the maximum LTV the lender offers
- You might need to increase your deposit to bring the LTV back down
Understanding Downvaluations
A ‘downvaluation’ occurs when a lender values a property less than the agreed purchase price. Research shows this happens in 20-25% of mortgage valuations in the UK, so it’s not uncommon.
Downvaluations aren’t evenly spread across the country.
London (27%), Yorkshire (25%), and the North West (24%) have the highest rates. Certain property types also face higher downvaluation risks, with flats at 29% and unique or non-standard properties at 31%.
The impact can be significant – about 18% of transactions affected by downvaluations eventually collapse. This often happens when buyers can’t afford the increased deposit required and sellers won’t reduce the price.
Common causes include market uncertainty, limited comparable evidence, and estate agents setting unrealistic asking prices to win instructions.
If your property is downvalued, the lender will usually share this information with your mortgage broker or directly with you. While they might not provide the full valuation report, they’ll generally indicate the figure they’re willing to lend against.
Read more: The myth of ‘down valuation’ – does it truly exist?
After the Valuation
Once the valuation is complete, the report goes directly to the mortgage lender rather than to you.
The time this takes varies by valuation method:
- AVM results are almost instant
- Desktop valuations take 1-2 working days
- Physical valuations generally take 3-5 working days for the report to reach the lender
The lender uses this report to make their final lending decision. If the valuation supports the agreed purchase price, they’ll move forward with your mortgage as planned.
You’ll receive a formal mortgage offer that states the loan amount, term, interest rate, and any conditions.
While you won’t automatically receive a copy of the full valuation report, some lenders provide a summary with your mortgage offer. Others will share it if you request it, though they might charge a small fee.
If you’ve paid for a more comprehensive survey alongside the valuation, you’ll receive the detailed survey report directly from the surveyor.
Most mortgage valuations are valid for six months, though this can vary between lenders. If your purchase takes longer than this to complete, you might need a new valuation.
Related:
Bouncing Back from a Downvaluation
If your property is valued lower than expected, don’t panic. You have several options to consider.
Your first step might be to negotiate with the seller.
Share the valuation result and explain the impact on your mortgage. Many sellers will reduce the price rather than risk the sale falling through, especially if they’re already committed to another purchase.
If negotiation isn’t successful, you could increase your deposit to cover the gap. For example, if you agreed to buy at £500,000 but the valuation came in at £480,000, you might need to find an extra £20,000 to proceed with the purchase.
Alternatively, you might explore different mortgage lenders. Valuation is partly subjective, and lenders have different criteria. A mortgage broker can help identify lenders whose valuation approach might better suit your property.
When and How to Challenge a Valuation
In some cases, you can challenge a valuation by providing additional evidence.
This won’t always succeed, but it’s worth considering if you believe the valuation is genuinely inaccurate.
Valid grounds for challenge include:
- Incorrect factual information (e.g., wrong number of bedrooms)
- Missed home improvements that add significant value
- Inappropriate comparable properties used
- Recent sales of similar properties at higher prices
To challenge a valuation, you’ll need strong evidence.
This might include details of recent comparable sales, evidence of improvements, or information about features the valuer might have missed.
Your mortgage broker can help with this process, submitting the challenge on your behalf and liaising with the lender. Be aware that success rates for challenges vary, and the process can take several weeks.
How Brokers Help
Mortgage brokers bring valuable expertise to the valuation process. They understand how different lenders approach valuations and can match you with those most suitable for your property type.
Brokers know which lenders:
- Are more flexible with unique or non-standard properties
- Tend to use more generous valuation methods
- Are less likely to downvalue in certain areas
- Have more realistic approaches to new-build valuations
If valuation issues arise, a broker can advise on the best course of action. They have established relationships with lenders and understand how to present challenges effectively.
Brokers can also help you find solutions to downvaluation problems. They might suggest alternative lenders, different mortgage products, or creative approaches to bridge valuation gaps.
In one case, a broker helped a client buying a converted barn that had been downvalued by a high-street lender. The broker identified a specialist lender with experience in unique rural properties, who valued the barn at the full purchase price, allowing the purchase to proceed.
While brokers can’t influence the valuation itself, their knowledge of lender preferences and processes can help you avoid valuation problems in the first place.
Read more: Specialist Property Mortgages
Moving Forward
Understanding how mortgage companies value properties puts you in a stronger position as a buyer or homeowner. By setting realistic expectations and preparing properly, you can reduce the risk of valuation surprises.
Remember that valuations aren’t personal – they reflect the lender’s need to protect their investment. If you face valuation challenges, stay calm and explore your options with the help of a professional.
If you’re just starting your mortgage journey, talk to an independent mortgage broker who can guide you through the process, including matching you with lenders whose valuation approach suits your circumstances.
Frequently Asked Questions
A mortgage valuation is conducted for the lender’s benefit to confirm the property provides adequate security for the loan.
A house survey is for your benefit as the buyer, providing detailed information about the property’s condition and potential issues. While a valuation is usually brief (15-30 minutes), surveys are more thorough and designed to highlight problems you should be aware of before purchasing.
In most cases, yes.
The cost typically ranges from £150-£1,500 depending on the property value. However, some lenders offer free valuations as part of their mortgage package, particularly for remortgages or as part of a promotional deal. Always check the terms of your mortgage offer to understand what fees apply.
No, the valuer works for the lender, not for you.
They won’t provide you with information about defects or issues unless they significantly affect the property’s value. For a comprehensive assessment of the property’s condition, you should commission your own survey such as a RICS Home Survey Level 2 or 3.
Lenders consider several factors when choosing between physical, desktop, or automated valuations.
These include the property type, loan amount, loan-to-value ratio, property location, and their own risk appetite. Generally, higher-value properties, unique homes, and higher LTV applications are more likely to require physical valuations.
Mortgage valuers will note obvious signs of damp or structural problems that could affect the property’s value, but they won’t conduct specialist investigations or look behind furniture.
For a thorough assessment of damp or structural issues, you should commission a more comprehensive survey like a RICS Home Survey Level 3 (formerly called a Building Survey).
Unique or unusual properties always present valuation challenges due to limited comparable sales evidence.
Lenders often require physical valuations by specialists with experience in similar properties. They may apply more conservative valuations or restrict the loan-to-value ratio offered. Specialist lenders who understand unusual properties may provide more favourable valuations than mainstream lenders.
