What is the difference between a Homebuyer survey and a mortgage valuation?

Among the prominently discussed surveys for prospective property buyers are mortgage valuations and homebuyer surveys. Delving into their disparities is crucial to determine the most fitting option for your circumstances.

What is a HomeBuyer survey?

HomeBuyer surveys, or ‘Level 2’ surveys, conducted by an RICS Chartered Surveyor, focus on visible issues in accessible areas, excluding detailed structural examination. The report outlines property maintenance needs but doesn’t discuss repair options or costs. 

Unlike the customisable Full Building Survey, HomeBuyer reports follow a standard format, recommended for newer, well-maintained properties. For a more tailored and in-depth assessment, especially for older or unique properties, a Full Building Survey is advisable.

Initiating an evaluation of the home’s actual condition, a homebuyer survey considers it as a livable space. It systematically assesses key areas, assigning ratings based on their condition. Urgent repairs are indicated for areas rated three, whereas those rated one demand no immediate action. This survey provides a comprehensive understanding of the property’s suitability as a potential home, guiding you in making informed decisions.

What is a mortgage valuation?

The expense of a mortgage valuation is subject to variation. Certain lenders may absorb the cost as an incentive to choose their mortgage services. Alternatively, if not covered, you’ll need to pay upfront, although some lenders might permit adding this fee to your total mortgage balance. The specific amount for the mortgage valuation varies among lenders, with individual price lists reflecting ascending charges corresponding to the property’s estimated value slated for assessment.

What is the purpose of a Mortgage Valuation?

A Mortgage Valuation, requested by the lender, assesses the property’s value to validate and manage the lending risk. Although you might not receive a copy, covering its cost may be necessary for mortgage approval. This process ensures the lender’s confidence in the borrowed amount being secure against the property’s value, safeguarding their financial investment. While primarily benefiting the lender, it can offer buyers insight into a property’s fair value. Lenders, typically banks or financial institutions, secure the loan against the purchased property, granting them rights until the mortgage is paid. Property repossession is a last resort, with warnings provided, emphasising collaboration to restore payments. In case of repossession, the lender ensures the property’s value exceeds the loan for financial recovery.

Why you shouldn’t rely on a mortgage valuation

Don’t solely rely on the mortgage valuation report, as it merely assures your lender of property value for repayment security. Unlike a survey, this report doesn’t uncover potential building issues. 

Research conducted by Allcott Residential revealed that less than 50% obtained proper surveys, and a quarter discovered post-move-in faults. Surprisingly, 58% wrongly believed the valuation covered the building’s condition, including issues like damp and subsidence. Many buyers underestimate the limitations of a valuation report, risking long-term costs. It’s crucial to opt for either a homebuyer’s report (for structural safety) or a comprehensive building survey for detailed property condition insights when purchasing a home.