Mortgage Surveys: Accurate Or Fiction?

When it comes to buying a property, there are a lot of factors to consider. One critical step is conducting a mortgage survey, also known as a property survey. This process involves a professional assessment of the property's condition, highlighting its strengths and weaknesses. While a basic valuation survey is necessary to obtain a mortgage, it may not provide a comprehensive understanding of the property's true state. In this paragraph, we will explore the accuracy of mortgage surveys and how they can impact the homebuying process.

Mortgage survey accuracy

The accuracy of a mortgage survey depends on the type of survey conducted and the purpose for which it is being used.

Mortgage Valuation Survey

A mortgage valuation survey is a basic requirement for obtaining a mortgage. It is carried out by the mortgage lender to ensure that the property's value aligns with the loan amount. While it provides a general overview of the property's value, it may not be detailed enough to uncover hidden issues or provide a comprehensive condition assessment. The cost of a basic mortgage valuation survey is typically included in the mortgage arrangement fees, but some lenders may charge a separate valuation fee, which is usually not more than £250.

House or Property Survey

A house survey, also known as a property survey, is a more detailed assessment of a property's condition. It is not required by all mortgage lenders, but it is recommended for buyers to gain a deeper understanding of the property's physical state, potential defects, and any necessary repairs or maintenance needs. A full building survey is the most comprehensive and expensive type of house survey, and it is typically recommended for older properties or those in obvious need of repairs. The cost of a house survey depends on the value of the property, the depth of the report, and factors such as property size, terrain, and location. On average, new homeowners can expect to pay between $376 and $745 for a professional property survey.

Mortgage Rate Surveys

Mortgage rate surveys provide information on interest rates for mortgage loans. However, these surveys may not always be accurate as mortgage rates can vary between different lenders and borrowers, and they can change frequently, sometimes multiple times per day. Therefore, it is recommended to use these surveys for ballpark estimates rather than expecting exact rates.

Overall, while mortgage surveys can provide valuable insights and protect the interests of both lenders and borrowers, it is important to consider their limitations and seek additional independent surveys or advice when making important financial decisions.

Lender requirements

Mortgage surveys are typically conducted by a licensed surveyor with experience in survey work and various tools. The surveyor will visit the site and inspect the interior and exterior of the property, including the structural and environmental conditions that could impact the market value. The cost of a basic valuation survey, often carried out by the lender, is usually around £300, although some lenders may charge a separate valuation fee. This basic survey will determine the property's market value and identify immediate risks to finances or personal safety. However, it is primarily conducted to protect the lender's interests rather than the buyer's.

For this reason, it is recommended that buyers commission their own more detailed survey for a deeper understanding of the property's condition. Detailed building surveys cost more (£1,000-£1,500+) due to their comprehensive nature, but they can prevent costly surprises later. A more thorough survey will provide a full picture of the property's physical condition, highlighting any potential defects, repair needs, and future maintenance costs. This information can help buyers make informed decisions about the purchase, allowing them to negotiate effectively and budget accurately for potential repairs.

It is important to note that mortgage surveys are different from boundary surveys, as they do not mark corner lines or determine the exact boundaries of the property. Instead, mortgage surveys focus on improvements on the property and ensure that they are accurately described in legal documents.

Property valuation

When buying a house, a mortgage valuation is necessary for the lender to determine the worth of the property. It is usually carried out by the mortgage lender, though sometimes the buyer may need to pay a separate valuation fee. The valuation is to ensure the property is worth the asking price and that the buyer is getting what they pay for. It also helps the lender decide whether to approve the mortgage application and how much they are willing to lend.

Mortgage valuations are not surveys and are not designed to benefit the buyer. They are a basic assessment of the property's value and do not uncover hidden problems or provide a comprehensive picture of the property's condition. They will, however, identify more immediate issues with the property, such as areas where the property does not meet legal standards.

A house or mortgage survey, on the other hand, is a detailed professional assessment of a property's condition, providing information about its physical state, potential defects, and any recommended repairs or maintenance needs. This is a separate service that the buyer may wish to commission to gain a deeper understanding of the property's condition. The cost of a survey will depend on the value of the property and the depth of the report.

There are different types of surveys available, depending on the property's age and condition, and the buyer's risk tolerance and budget. A full building survey is the most comprehensive and expensive type of survey, though a valuation is not usually included with this report. For older properties or those in obvious need of repair, a full building survey is recommended.

It is important to note that mortgage rates can vary between lenders and borrowers, and "mortgage rate surveys" may not provide accurate real-time information.

Survey costs

The cost of a property survey depends on the value of the property and the depth of the report. Basic mortgage valuation surveys are sometimes included in the general mortgage application fee, but lenders may charge a separate valuation fee. This rarely costs more than £250.

If you organise an independent survey, there will be some variation between firms as surveys are not standardly priced. A full building survey (or full structural survey) is the most comprehensive and expensive type of survey. It's important to note that a valuation is not usually included with this report. A mortgage valuation survey typically costs between £150 and £1,500, depending on the size and value of the home.

While a basic valuation survey can help identify immediate risks to your finances or safety, it is designed to protect the lender's interests rather than the buyer's. It may be sufficient for new-build homes, but it is generally advisable to arrange additional independent surveys. A more thorough home survey can help you save money on unexpected future costs.

Online mortgage rate surveys can be a helpful way to get a "ballpark" estimate of interest rates, but they are not always accurate. Rates can vary by as much as 50 basis points (0.50%) between surveys, and they do not always align with actual rates from lenders. It is important to consider that rates depend on various factors, including loan amounts, property types, and credit scores.

Survey types

There are several types of mortgage and house surveys available, with some going into more detail than others. A basic valuation survey is required for all residential properties to ensure the property is worth the asking price. This is typically carried out by the mortgage lender to understand the value of the property for lending purposes and is not a full house survey. It does not include a detailed analysis of the property's condition and may not involve a physical inspection of the property.

A more comprehensive option is a house or mortgage survey, which provides a detailed assessment of the property's physical condition, including potential defects, repair needs, and future maintenance costs. This type of survey is typically commissioned by the buyer and can help identify any issues that may impact the property's value.

The Royal Institution of Chartered Surveyors (RICS) offers three levels of surveys:

• Level 1 (Condition Report): A basic survey that offers a traffic-light rating of the property's condition, flagging risks and urgent defects.
• Level 2 (HomeBuyer Report): This level involves a more detailed inspection of the property, including accessible parts such as the roof, external walls, internal structure, joinery, plumbing, and electrical systems.
• Level 3 (Building Survey): The most comprehensive type of survey, suitable for older properties or those in need of repairs. It provides an in-depth inspection of the property, revealing potential flaws, underlying issues, and historical construction details.

Other types of surveys include the Home Survey Level Two, offered by the HomeOwners Alliance, and the Residential Property Surveyors Association (RPSA) survey, which provides a consumer-friendly format with rigorous quality checks.

It is important to note that survey costs can vary depending on the value of the property and the depth of the report. It is recommended to do your own research and choose a surveyor who is a member of a professional body such as RICS, RPSA, or Sava to ensure they adhere to the set standards and protect your interests.

Frequently asked questions