When a mortgage lender is evaluating whether or not you are eligible for a loan (or the amount requested), they must verify two things;
There are various ways the mortgage lender can do this. The conventional way is to hire the services of a surveyor to visit your property and perform a valuation.
But more recently, many mortgage lenders have been using the desktop valuation method. This is when online information such as land registry data (for your property and other comparable properties in the neighbourhood) and house price indices, to arrive at an approximate market value.
A desktop valuation might consist of a visual inspection of the property (without entering it) as well as using online information. The aim of the mortgage lender is to estimate the price your property would sell for in the open market. They need this information in case a sale needs to be made immediately, for example, a repossession.
It is because of this reason their valuation may be a bit more conservative than your own or that of an estate agent’s.
If you are dissatisfied with the valuation of your property, and you have the necessary evidence to back it up- for example, an important home renovation that the bank valuator overlooked or similar homes in your neighbourhood that have recently been sold for more- you can discuss with your mortgage lender and request a review.
If your application was made through a broker, ask them to make the request on your behalf. However, it is less likely that a lender will review their original valuation upwards.
Yes, it does. The lower value of your property will affect the amount you intend to borrow or the interest rate. After all, the lower the property value, the lower its coverage.
You will need all records relevant to the valuation of your home, in order to successfully challenge the mortgage lender’s valuation. Ensure you examine the details of their assessor’s survey for apparent mistakes.
If the assessor missed the extra room or a basement extension or utilized the wrong tax authority, these mistakes can significantly affect your home’s valuation. Present them in clear pictures (or reports) to your mortgage lender.
Other things that could affect the valuation report are the wrongful inclusion of environmental factors such as propensity to floods or mould.
The value of a home is usually an estimate until someone actually pays for it. If you live in an area with similar property types, and can prove that one or more homes within recently sold for a significantly higher value, you could take the new evidence to your mortgage lender.
Because this is public information, it is easy to obtain. If there are no recent home sales in your area, the next useful thing would be to seek areas of comparison between your property and others identical to it. Consider things like the style, location, age, plot size, square footage, number of rooms and more.
Yes, you may. A commercial mortgage is a loan backed by commercial property such as a shop building, warehouse or rental property. In some cases, a part of the proceeds could form your equity contribution. However, it is important to get a matching LTV (Loan to Value) for your mortgage so you don’t give a security that is ultimately too high for the mortgage you need.
Depending on the location and the policies of the mortgage lender, it could generally be between 5 – 10 years for stabilised commercial properties that have regular cash flows, and 1 – 3 years for transitioning properties, for instance, newly opened properties or those being renovated.
Some of the records are available online for some homes. For instance, the Land Registry office has online records of properties sold within certain periods. However, the information may be a month late because there is usually a time lag. Depending on the current market situation, some lenders may consider a month too significant to use.
In some situations, yes. Any infrastructure plans that affect the characteristics a district or town can impact the prices in a marked way. Transportation projects such as rails or motorways, that ease commuting between central business districts can up the value of homes in that area.
The development of large shopping malls can also add value to buildings in that area because they create jobs and draw more people (and income) to that area. A general urban renewal could prove a good argument when challenging your home valuation.
As a matter of fact, there are. Some major road renovations could lead to blockage or limited accessibility to certain districts. Although it is temporary, some projects take a long time to complete, and during those few months or years, the value of homes in that area will be low.
Not many mortgage lenders will be in a hurry to review their valuation upwards. In such cases, you don’t have to go ahead with their conditions. There are other lenders who will be willing to take up your mortgage request.
Be careful of putting in multiple loan applications at different banks otherwise you risk ruining your credit score.
Need more information about challenging your mortgage adviser? Please contact us: 0800 020 9561