How does a valuation to mortgage offer work?
A property valuation leads to a mortgage offer, which usually takes around one week to receive from the lender. That’s once the valuation is complete after being performed physically by a surveyor or using an online desktop valuation. You need the valuation report to match up with the agreed sale price of the property in order to receive a mortgage offer. But how do they work separately, and what happens between the valuation and mortgage offer?
What is a mortgage valuation?
For example, if you agree on a price of£250,000, but the valuation report comes back at £200,000, you’ll know that you’re potentially overpaying for the home. That would mean overpaying by 20%, though it’s unlikely the lender would offer a mortgage on an overpriced property.
How does a mortgage valuation work?
Traditionally, lenders would instruct a surveyor to visit the property and conduct a valuation. That changed in the aftermath of Covid, with an increasing number use desktop valuations to determine the property’s value. A desktop valuation consists of sales data provided by companies like Rightmove – over the years, the accuracy of this data has improved, and many lenders now use it as the primary way to see how much a home is worth.
There may also be some occasions where a desktop valuation isn’t enough, and the lender needs to send a surveyor to the property. An example of this involves a home where the construction isn’t a standard material, and the surveyor needs to see if it could pose any potential long-term issues.
The difference between a mortgage valuation and house survey
A mortgage survey isn’t as in-depth as a house survey. It requires the lender to understand the overall value of the home to see if they should offer a mortgage. A house survey is a full structural survey that alerts you to potential issues around the home, such as structural problems. A mortgage valuation doesn’t involve all the steps of a house survey, and you often won’t see the final report.
How much does a mortgage valuation cost?
Some mortgage valuations are free and included by the lender; others can be as much as £1,500. Mortgage valuation costs are typically determined by the sale price of the property. The higher the property price, the more you may need to pay for the valuation unless it’s offered for free.
What is a mortgage offer?
Assuming the mortgage valuation comes back at the agreed sale price, and all other requirements are met, you can expect to receive a mortgage offer from the lender. The offer is proof that your application was approved and is usually valid for between three to six months.
How can I get a mortgage offer?
You’ll need to complete the application process to get a mortgage offer. This typically involves providing information relating to your address history, finances and credit score. Financial income often requires you to provide:
- Credit score
- Employment history
Details about the property will also be required so the lender can carry out the valuation report. The majority of lenders tend to offer a mortgage within days of receiving the valuation report.
Difference between a MIP and mortgage offer
A MIP, otherwise known as a ‘mortgage in principle’, is an estimation of how much you could borrow. It doesn’t involve a credit check and only requires basic information. MIPs are great for showing estate agents and sellers that you’re serious, and you could potentially borrow the MIP amount if the information you entered is correct. But it’s only the mortgage offer that acts as an official final lending decision.
How long does it take to get a mortgage offer?
Many factors go into the length of time it takes to get an offer, including how quickly you provide the information, the speed at which the lender operates, and whether the valuation is desktop or physical. If, for example, you use an online mortgage lender like Molo, the process will be faster as there are no appointments or paperwork involved. Everything happens digitally, which significantly speeds up the time it takes to offer a mortgage.
What happens in between a mortgage valuation and offer?
Most lenders issue a mortgage offer within a few days of receiving the property valuation. Therefore, the valuation to mortgage offer timescale is relatively short and is one of the faster aspects of getting a mortgage.
What happens once I receive the mortgage offer?
If you’re happy with the offer, you can begin the final phase of buying your new home. Your solicitor will liaise with the lender about receiving the mortgage funds and set a date to exchange contracts. All that’s left for you to do is get excited about moving into your new place.