Mortgage valuations and home surveys are often confused because they can be interchangeably referred to as ‘surveys’ within the mortgage industry. Here we’ll clarify what each of these processes entail, what the difference is between the two, and where to go for help with these during your home buying journey.
Mortgage Valuation Vs. Home Survey
The main difference between these two services is that the mortgage valuation survey is concerned with the value of the property, whereas the home survey is concerned with the condition of the property. The valuation is also essential and mainly benefits the lender, but the home survey is non-essential, and mainly benefits the homebuyer.
Mortgage Valuation
When buying a home, a mortgage valuation survey is an essential part of the mortgage process. Mortgage lenders use this report to ensure that the property you buy is worth what they’re lending you. A valuation survey will provide a market value figure for the property and a minimum reinstatement (rebuild from scratch) figure. The latter can be useful when you seek a home insurance quote.
Home Survey
A home survey is an optional but highly recommended detailed survey of the condition of the property that you plan to buy. Usually you have to pay for this type of survey, but some mortgage deals include them as a perk. There are 3 types of homebuyer surveys available:
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Condition Report (RICS Level 1) - Minimum detail, highlights structural repairs required
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Homebuyer Report (RICS Level 2) - More detail, covers most issues like damp and timber pests
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Building Survey (RICS Level 3) - Full report, detailing all construction materials, state of repair and potential future risks
Home surveys are more costly, the higher the level, and the larger, or more costly your property. The most suitable home survey for your needs will depend on the type of property you’re buying.
Do you need a home survey?
Possibly, but not all buyers need a home survey by a Royal Institution of Chartered Surveyors (RICS) surveyor.
Firstly, while recommended, they are generally optional reports, although lenders may insist on a full survey for riskier property types. Secondly, if you’re buying a new build home, you won’t need an additional survey, as the developer is usually responsible for any property issues arising within your first few years.
On the other hand, if you’re buying a non-standard construction property, like a timber-framed house or thatched cottage, the lender may require a home survey as part of the mortgage condition. It’s also strongly advisable to pay for a more detailed survey if you’re buying a home with unusual construction, as issues that require repair with non-standard building materials can be very costly to fix.
Can lenders refuse a mortgage based on a valuation or home survey?
Yes, it’s possible, or they may reduce the size of the loan available to you if the mortgage valuation is lower than the purchase price. In this case you could renegotiate the price with the seller, however, this can be easier when you have a full home survey report to back up the property issues.
It’s less likely that a home survey report would lead to issues with mortgage lender approval, as their main focus is the property value. However, home survey reports may have more influence on the lender when it comes to non-standard construction properties.
If you’re unsure whether to arrange a home survey, and which level to request, it’s a good idea to speak to an experienced broker, like Teito, for guidance. We can help you determine what kind of survey you need and recommend a surveyor who can carry it out.
