Remortgaging is the process of switching your existing mortgage to a new deal, either with your current lender or a new one. A key step in the remortgage process is the house valuation, where your property is assessed to determine its current market value. The lender uses this valuation to ensure that the property provides adequate security for the new mortgage.
This guide will explore the various aspects of house valuations specific to remortgaging in the UK, including the types of valuations available, associated costs, factors influencing valuation costs, and how these valuations affect the remortgage process. We’ll also look at potential alternatives and advice for homeowners undergoing this process.
1. Understanding Remortgaging
Before delving into the valuation process, it’s crucial to understand why and when remortgaging occurs:
- Remortgaging involves paying off an existing mortgage with the proceeds from a new mortgage on the same property.
- Homeowners often remortgage to:
- Secure a better interest rate.
- Release equity in the property.
- Move from an interest-only to a repayment mortgage.
- Switch to a more flexible mortgage product.
- When remortgaging, a lender will need to assess the property’s current value to determine how much they are willing to lend.
2. Types of Valuations for Remortgaging
The type of valuation required for a remortgage may vary depending on the lender and your circumstances. Valuations range from simple automated assessments to comprehensive in-person surveys. The type of valuation used will directly influence the cost.
2.1 Automated Valuation Models (AVMs)
Many lenders use Automated Valuation Models (AVMs) for remortgages. These models estimate the property’s value using an algorithm that analyzes historical sales data, local market trends, and other property characteristics. AVMs do not require a surveyor to visit the property.
- Cost: Typically free as part of the lender’s remortgage service.
- Advantages:
- Quick and efficient.
- Cost-effective for lenders.
- Limitations:
- AVMs may not accurately reflect the property’s condition, improvements, or unique features.
- They can be inaccurate if local market data is outdated or incomplete.
2.2 Desktop Valuations
A desktop valuation is similar to an AVM but involves a surveyor or valuation professional who assesses the property remotely using online data, property records, and current market conditions. Desktop valuations are a middle ground between AVMs and full physical valuations.
- Cost: Generally ranges from £50 to £150, though some lenders may include this in their remortgage package.
- Advantages:
- Faster and cheaper than a physical inspection.
- More reliable than an AVM, as a human assesses the data.
- Limitations:
- No physical inspection of the property means potential issues like structural damage or unreported improvements are overlooked.
2.3 Drive-By Valuations
In a drive-by valuation, the surveyor assesses the property’s exterior condition by physically visiting and observing the property from the outside. This is more comprehensive than a desktop valuation, but still does not involve an internal inspection.
- Cost: Typically between £100 and £300.
- Advantages:
- Provides a visual inspection of the property’s exterior, giving the surveyor more insight into its condition and curb appeal.
- More accurate than a desktop or AVM for properties with specific external features.
- Limitations:
- Does not account for internal issues, which could affect the property’s value.
- More expensive than automated or desktop options.
2.4 Full Physical Valuations
A full physical valuation involves a surveyor visiting the property to inspect both its interior and exterior. The surveyor will evaluate the property’s overall condition, structure, layout, and any improvements or defects that may affect its market value.
- Cost: Ranges from £300 to £800 for standard properties, though this can be higher for larger or more complex homes.
- Advantages:
- Provides the most accurate and detailed assessment of the property’s value.
- Identifies issues that could reduce the property’s value or impact mortgage eligibility.
- Limitations:
- More time-consuming and expensive than other valuation types.
- May not always be necessary, depending on the property’s condition and the lender’s requirements.
2.5 Specialist Valuations
For non-standard properties, such as listed buildings, unique architectural homes, or properties with extensive land, a specialist valuation may be required. This often involves surveyors with specific expertise in valuing unique property types.
- Cost: £800 to over £2,000, depending on the complexity and size of the property.
- Advantages:
- Ensures an accurate valuation for properties that fall outside typical market norms.
- Provides lenders with confidence when dealing with unusual or high-value properties.
- Limitations:
- The higher cost may not be justified for standard properties.
- Takes more time to arrange and complete due to the specialized nature of the assessment.
3. Cost of House Valuations for Remortgaging
Valuation costs for remortgaging vary based on several factors, including the type of valuation, the property’s location, and the lender’s specific requirements. Some lenders cover the cost of valuations as part of their remortgage deals, while others may pass the expense on to the homeowner.
3.1 Valuation Costs by Type
| Type of Valuation | Estimated Cost Range | When Typically Used |
|---|---|---|
| Automated Valuation Model (AVM) | Free or covered by lender | For standard properties in stable markets. |
| Desktop Valuation | £50 – £150 | When a quick, remote valuation is sufficient. |
| Drive-By Valuation | £100 – £300 | For properties needing external inspection. |
| Full Physical Valuation | £300 – £800 | When a detailed internal and external assessment is needed. |
| Specialist Valuation | £800 – £2,000+ | For unique or non-standard properties. |
3.2 Lender-Provided Valuations
Many lenders offer a free valuation as part of their remortgage package. However, it’s important to verify this when comparing mortgage deals, as some may charge a valuation fee or add it to the mortgage costs.
- Free Valuations: Some remortgage offers include a free valuation, either through an AVM, desktop, or drive-by process.
- Paid Valuations: For full physical valuations or when remortgaging with a more complex property, the lender may pass the cost onto the homeowner. In these cases, the fee is typically added to the closing costs.
3.3 Cost by Property Size and Location
- Size: Larger properties generally require more time to assess, which increases the cost of a full physical valuation. For instance, valuing a small flat may be quicker and cheaper compared to a large detached house.
- Location: Properties in London and other major cities may incur higher valuation fees due to the complexity of the housing market and the higher property prices in these areas. Conversely, properties in rural or less expensive regions often have lower valuation costs.
4. Factors Influencing Valuation Costs for Remortgaging
Several key factors can influence how much you’ll pay for a house valuation when remortgaging. Understanding these factors can help you plan ahead and avoid unnecessary expenses.
4.1 Type of Valuation
As noted earlier, the type of valuation significantly impacts the cost. Automated and desktop valuations are cheaper but may lack accuracy, while full physical valuations provide a detailed assessment but come at a higher price.
4.2 Property Size and Condition
Larger homes take longer to inspect and evaluate, increasing the cost of a physical valuation. Additionally, properties with known structural issues or unique features may require specialist input, which can further drive up costs.
4.3 Location
Valuation costs are often higher in cities and areas where property prices are more volatile. For example, a valuation in London or the South East of England may cost significantly more than one in the North of England or Wales.
4.4 Market Conditions
In highly competitive property markets, lenders may require more detailed and accurate valuations to ensure the property is adequately secured. This can lead to higher valuation fees, particularly if full physical or specialist valuations are needed.
4.5 Lender Policies
Different lenders have varying policies regarding valuation fees. Some include the cost as part of their remortgage offer, while others may pass the expense onto the borrower. It’s essential to compare remortgage deals and factor in whether a valuation fee will apply.
5. Why Accurate Valuation Matters in Remortgaging
The property valuation is a critical component of the remortgage process, as it directly affects how much a lender is willing to lend. An inaccurate or low valuation can have significant financial implications.
5.1 Loan-to-Value (LTV) Ratio
The Loan-to-Value (LTV) ratio represents the percentage of the property’s value that you want to borrow. For example, if your home is valued at £200,000 and you want to borrow £150,000, your LTV ratio would be 75%. Lenders typically offer better interest rates for lower LTV ratios, as they represent a lower risk.
- A higher valuation can reduce your LTV ratio, potentially qualifying you for a better interest rate.
- A lower valuation can increase your LTV ratio, which may lead to higher interest rates or even rejection of your remortgage application.
5.2 Equity Release
If you are remortgaging to release equity in your property (e.g., to fund home improvements or pay off other debts), an accurate valuation is essential. A higher valuation will increase the amount of equity you can release, while a low valuation could limit your options.
5.3 Mortgage Approval
Lenders rely on valuations to ensure that the property provides sufficient security for the loan. If the valuation is lower than expected, the lender may reduce the loan amount or reject the application altogether. This can disrupt your remortgage plans or force you to reconsider the deal.
5.4 Impact on Fees
Inaccurate valuations can also affect the fees associated with the remortgage process. For example, if the property is undervalued, you may need to pay higher arrangement fees, legal fees, or even mortgage insurance.
6. The Remortgage Process: How Valuations Fit In
Understanding how the valuation fits into the broader remortgage process can help you prepare and ensure a smooth transaction.
6.1 Step-by-Step Remortgaging Process
- Research and Compare Mortgage Deals: Start by comparing remortgage deals from different lenders. Pay close attention to interest rates, fees, and whether the lender offers a free valuation.
- Submit Application: Once you choose a remortgage deal, you’ll need to submit a formal application, including details about your current mortgage and financial situation.
- Valuation Ordered: After receiving your application, the lender will order a valuation. Depending on the type of valuation, this could be an AVM, desktop, drive-by, or full physical inspection.
- Valuation Report: The lender will receive the valuation report, which outlines the current market value of the property.
- Offer Decision: Based on the valuation and your financial information, the lender will make an offer, including the mortgage amount, interest rate, and terms.
- Finalizing the Remortgage: Once you accept the offer, your lender will work with your solicitor to finalize the remortgage, pay off your old mortgage, and transfer the new loan.
7. Alternatives to Lender Valuations
If you disagree with the lender’s valuation or want to ensure accuracy, you can opt for an independent valuation. Independent valuations are carried out by qualified surveyors and provide an unbiased assessment of the property’s value.
- Cost: Independent valuations typically range from £300 to £800, depending on the property’s size and location.
- Advantages:
- Offers a second opinion if you feel the lender’s valuation is inaccurate.
- Can be used in negotiations with the lender to secure a better deal.
- Disadvantages:
- The cost is borne by the homeowner and is not typically refunded, even if the independent valuation differs from the lender’s assessment.
8. Choosing a Valuation Method for Remortgaging
When remortgaging, the type of valuation used can affect both the cost and outcome. Here’s how to decide which method is right for you:
8.1 AVM or Desktop Valuation
- Best for: Standard properties in stable markets, when you don’t expect the valuation to significantly impact the loan terms.
- Cost: Free or low-cost.
- Limitations: May not account for improvements, extensions, or unique property features.
8.2 Drive-By Valuation
- Best for: Properties where the external condition is a good indicator of the overall value.
- Cost: Mid-range.
- Limitations: Does not account for internal issues that could affect the property’s value.
8.3 Full Physical Valuation
- Best for: Older properties, homes with significant improvements, or properties with potential structural issues.
- Cost: Higher.
- Advantages: Provides the most accurate and detailed assessment, ideal for securing the best remortgage terms.
Conclusion
House valuations are a crucial step in the remortgage process, influencing how much a lender is willing to lend and what interest rates you may qualify for. Valuation costs vary based on the type of valuation, the size and location of your property, and the lender’s policies. While some lenders offer free or low-cost valuations, homeowners should be aware of potential fees, especially for full physical or specialist valuations.
In most cases, the cost of a valuation is outweighed by its importance in securing the best possible remortgage deal. A higher valuation can reduce your loan-to-value ratio, resulting in better interest rates and more favourable terms. However, an inaccurate or low valuation can limit your options, so it’s essential to choose the right valuation method and, if necessary, seek an independent opinion.
By understanding the different types of valuations and their associated costs, homeowners can make informed decisions that maximize the benefits of remortgaging. Whether opting for an AVM, desktop, drive-by, or full physical valuation, being prepared and knowledgeable will help ensure a smooth and successful remortgage process.
