What is a mortgage down valuation and what can I do about it?

Full answer

A down valuation can derail a house purchase at a late stage, often after significant time and money have already been spent on the transaction, so understanding your options is important if it happens to you. **Why lenders require a valuation** Every mortgage lender arranges a valuation of the property (either a basic mortgage valuation, or sometimes combined with a more detailed survey if you have chosen one) to confirm the property is worth at least roughly what you are paying, since the property itself is the security for the loan -- if the valuer's figure comes in below your agreed purchase price, the lender will only base their mortgage offer on the LOWER valuation figure, not the price you agreed with the seller. **How this creates a funding gap** Because your mortgage amount is calculated as a percentage (based on your loan-to-value ratio) of the LOWER valuation, not the original purchase price, a down valuation effectively increases the deposit you need to find to complete the purchase at the originally agreed price -- if you cannot find this extra money, you cannot complete the purchase at that price using that lender's offer. **Worked example** A buyer agrees to purchase a house for £300,000 with a 90% mortgage (needing a 10% deposit of £30,000, borrowing £270,000). The lender's valuer values the property at only £280,000. Since the lender will only lend 90% of the LOWER £280,000 valuation (£252,000), the buyer now faces an £18,000 shortfall (the difference between the £270,000 they needed to borrow and the £252,000 the lender will actually offer) that they must either find from savings, negotiate away by asking the seller to reduce the price, or resolve some other way. **Your options after a down valuation** First, you can try to renegotiate the purchase price down with the seller to match (or move closer to) the valuation figure, which is often the simplest solution if the seller is willing. Second, you can find additional deposit funds yourself to bridge the gap and proceed at the original price with a smaller mortgage. Third, you can challenge the valuation by asking the lender to review it, or providing comparable sale evidence of similar properties that sold for more, though lenders will not always change a valuer's figure. Fourth, you can approach a different lender for a fresh, independent valuation, though there is no guarantee a second valuer will value the property any higher. Finally, if none of these work, you can walk away from the purchase, though you may lose money already spent on surveys, legal fees, and mortgage arrangement fees. **Why down valuations happen** Down valuations often occur in a falling or uncertain property market, when a valuer is cautious about recent comparable sales, or when a property has unusual features that make it hard to find directly comparable recent sales -- new-build properties are also more prone to down valuations, since the new-build price can include a premium that a valuer working from resale comparables may not fully recognise. **Practical tip** If buying in a competitive or fast-moving market, try to base your offer on realistic recent comparable sale prices for similar properties nearby rather than purely what a seller is asking, and keep some contingency savings available in case a down valuation requires you to bridge a funding gap to keep the purchase on track.

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