It is easy to get whipped up with all the excitement when buying a property. After all, it’s one of the single most expensive purchases you’ll ever make and sometimes you’ll do whatever it takes to make your dreams a reality. However, what if your mortgage lender decides that the property isn’t worth what you are willing to pay for it? This is known as down valuing.
Here at enact conveyancing, we’ve compiled our guide to explain what exactly down valuating is and what you can do if this happens to you.
What is down valuing?
Once you’ve had your offer accepted on a property and you’ve started to make progress with the transaction your mortgage lender will want to send out a surveyor to carry out a mortgage valuation.
A mortgage valuation is the lender’s way of confirming the property’s value and to check the property is suitable security for the loan you’ve applied for.
In some instances, the mortgage lender will decide that the value of the property is less than the amount you’ve said you’re willing to pay for it. A down valuation may affect the amount you can borrow and/or the interest rates available to you.
Why does down valuing happen?
There are several reasons why a down valuation might happen. Currently, UK house prices remain at an all-time high with the average property price in the UK valued at £278,000. In response, some house sellers may take advantage of this and set their asking price higher than the property is worth as they know buyer demand currently outweighs the number of properties on the market.
Other reasons according to Zoopla include:
- The seller is over-optimistic about the amount of value their renovations have added to their property
- Lenders are being cautious about over-inflated prices
- The surveyor has found problems with the property
- The surveyor has valued a property that’s outside of their usual area of expertise. In this case, it is possible they may have been unfamiliar with the nuances of the local markets
Down valuing when remortgaging
While you may think of down valuing affecting those who are buying and selling a property it can also affect those that are looking to remortgage with a new lender.
When a fixed rate mortgage ends most homeowners will shop around to find a new fixed rate mortgage to avoid going onto their current lenders’ standard variable rate.
If you decide to move to a new mortgage lender or think your property is worth more after carrying out home improvements your current or prospective new lender will need to carry out a valuation on the property. This can range from a drive by valuation to a more in-depth home survey.
The result may be that the valuation comes back as less than you had expected meaning your application is rejected by the new lender. In this scenario, you may have little choice but to stick with your current lender and potentially pay higher monthly repayments and interest rates.
What can you do if down valuing happens to you when buying a property?
If you’ve fallen in love with your dream home, but then get a down valuation from your lender, there are some things you can do to avoid missing out.
- One of the first things to do would be to try to renegotiate the price with the seller – or simply lower your offer. If the seller is looking to move quickly, they may be willing to reduce the asking price to make a quick sale
- If you cannot renegotiate the asking price and are unwilling to walk away from the transaction you could get a personal loan to make up for the shortfall from the lender
- Get the property valued again by a different surveyor acting for a different lender
- If you had savings to cover renovation costs, could you increase your deposit to cover the cost of the devaluation?
While a down valuation isn’t ideal with a little determination there is still every possibility your property transaction could still go ahead.
Here at Enact, we provide the highest quality residential property conveyancing services in the fastest, most efficient, and most innovative way. If you’re looking to move now or soon get a free instant conveyancing quote here.
