The Mortgage Valuation is a key process in the purchase of any residential property where a mortgage is required to buy the property. The instruction to undertake a Mortgage Valuation is issued by the Mortgage Lender. Mortgage Valuations are undertaken on behalf of the Lender with the objective of confirming that the property is suitable for lending on, and what amount it is appropriate for the Lender to lend.
Buyers may not receive a copy of the Mortgage Valuation and should be encouraged to commission their own report into the condition of the property, particularly when buying older, larger or higher value properties.
In normal operating conditions, Mortgage Valuations are typically completed within 1 week of the Lender issuing the instruction. However, the Covid pandemic has created a backlog of instructions and whilst Lenders are making increasing use of the faster methods of Valuation, Purchasers may still need to wait up to 4 weeks for the Mortgage Valuation to be completed.
The valuation can be undertaken in one of three ways.
Automated Valuation Model (AVM) – Typically used where the Loan to Value ratio (LTV) is below 60%. It uses mathematical modelling and database analysis to calculate a property’s value. No physical inspection of the property is required so valuations whereu an AVM is used are often completed quicker than those instances where a surveyor needs to visit the property.
Desktop Valuation – Undertaken by a Surveyor but without a physical inspection of the property. The Surveyor will use an AVM and then overlay this with their knowledge and understanding of the area, as well as the comparables and photographic evidence available. These are more often used where the LTV is low, or for new build properties and developments where the property is not completed.
Physical Inspection – A surveyor will visit the property to provide the Mortgage Valuation, but the level of inspection undertaken is only designed to uncover obvious, visible defects. This should not be confused with the more detailed inspection required for a Home Condition Report; Home Buyers Report or Building Survey.