The mortgage valuation is based on the surveyor’s knowledge of comparable prices in the locality. It may also give a “minimum reinstatement value”, which is the amount of money it would take to rebuild the property from scratch, should it ever be necessary. The mortgage lender will also ask to see evidence that a suitable buildings insurance policy is in place, together with confirmation that you are covered for the minimum reinstatement value.
The mortgage valuation is for the benefit of the mortgage lender, NOT you the buyer! It is designed to give enough information for the lender to decide whether the property is safe to lend on, and up to what amount. Though you may pay for the report, you may not get a copy or even see what the surveyor has written. In some circumstances your mortgage broker may be able to obtain a copy of the report but this is not always possible.
You should NOT solely rely on your mortgage valuation if you are buying a property. In fact, the lenders valuation is exactly that, a valuation, and not a survey at all. The lender is taking the risk when lending, that the security (the property) is of adequate value to cover the loan they provide to the borrower. This safeguards them should the borrower default on the payments and repossession is necessary. This is the only reason the mortgage lender carries out a valuation at all.
Have you ever heard the phrase ‘drive by valuation’, ‘desktop valuation’ or ‘index valuation’? No, well let us explain, all these basically mean is that no one has actually physically been to the property to value it. Shocked? Well this is why it is so important to have your own survey done on a property you want to buy, because if you don’t and there are problems you didn’t know about they are now YOUR problems.
At Prospect Tree Mortgages we encourage buyers to carry out at least a homebuyers report when buying a property. An independent surveyor working for and paid by you ‘the buyer’ has your best interests in mind. You will receive a comprehensive report on the state of the property you are buying, and we can assure you the surveyor will spend at least a few hours inspecting the property and will provide a detailed report. It always surprises us that when making the most expensive purchase in their lives, buyers in the main will not have a survey to check that the property is safe and does not have any hidden issues.