Mortgage down valuations: what you need to know

Are you trying to buy or remortgage a property and looking for a house valuation? Down valuations are rife in the market at the moment, and they can be a real hindrance to the mortgage application process.

Property – particularly in London – isn’t holding the value it had, say, six years ago, and very little has sold in the last two years to use as a comparable when pricing. Added to this lenders are quite specific about which valuers they use – particularly at the top end – there is a marked increase of down valuations.

Why is this a problem for the mortgage process?

If you’re purchasing your property, you will agree a price with the vendor based on its asking price, and you will secure a mortgage in line with that value. Generally when you buy a property, you’ll organise a home buyers survey, employing the services of a property surveyor. However, a lender will also send in its own valuer to carry out a property valuation, and if they decide it’s not worth what you’ve agreed to pay, the lender will retract their mortgage offer. Or at least reduce the amount they’re willing to lend, leaving the buyer having to find further cash from somewhere.

This is a huge spanner in the works as it can mean starting the mortgage application process from scratch.

If you’re remortgaging, a down valuation will impact the loan to value (LTV) which needs to be achieved. As such, we’re seeing a much higher demand for mortgages around 90% LTV, with clients considering second charge products more and more. Second charges are a more expensive option, but they offer much higher LTVs than first charge mortgages.

What is this doing to lending trends?

We’re seeing an increased demand for high LTV mortgages, even at the higher end of the market, with some clients seeking as high as 90% LTV. Being aware of LTV thresholds is key because the higher the LTV, the more expensive the loan will become.

How do you avoid this issue?

Valuing it properly from the outset is key:

  1. House price checker tools – the first thing to do it go onto one of the main portals and use their house price estimation tool; this will show you what your property last sold for, and what to expect now based on any renovations carried out, and the current local market.
  2. Be realistic – the current market is experiencing challenges, so be realistic about what you are likely to achieve. One of the biggest factors in a property struggling to sell is a vendor’s expectations falling out of line with a potential vendor’s.
  3. Research – make sure you seek opinions from multiple estate agents, and ask them to show examples of what has recently sold. Make sure these are completed sales, and not offers that eventually fell through. Also ask estate agents to write a letter with their projected market value.
  4. Consider your property’s visibility in property searches – if your property is valued at, say, £1.1million, anyone searching for properties between £900,000 and £1million won’t see it in their search.
  5. Start at the lower end of what you would accept – This will attract more interest and encourage offers to be made, which may well push the price up to where you’d like it to be.
  6. Presentation – how your property is presented is also key, as larger and brighter rooms will be more appealing and will likely result in a better valuation.
  7. Consider your target buyer – ensure your property is presented in a way which suits the end buyer – e.g. is it a family home, or multiple occupancy rental property? Whatever it is, presenting it appropriately will help you get the appropriate valuation.
  8. Remortgaging – some buyers, particularly in the current climate, are choosing to refinance their property, rather than sell. If this is the case, it will still require a valuation; different lenders use different valuers, so valuations may vary due to the fact they are subjective. If one lender gives you a valuation which isn’t in line with your expectations or prior research, you can always try another one.

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