Mortgage Guide
What happens if the house is down-valued by the lender?
A down-valuation is when the lender's mortgage valuation comes back lower than the price you've agreed to pay for the property.
It doesn't automatically mean you can't buy the house.
But it can affect how much the lender is prepared to lend, your loan-to-value and potentially the mortgage product available to you.
The good news is that there may be several ways forward.
Quick takeaways
- A mortgage valuation can be lower than the price you've agreed with the seller.
- The lender may reduce the amount it is prepared to lend or the lower valuation may move you into a different loan-to-value band.
- Possible options can include renegotiating the purchase price, increasing your deposit, reviewing the mortgage product or considering another lender.
- A mortgage valuation is primarily for the lender. It isn't the same thing as having a more detailed survey of the property's condition.
What is a mortgage down-valuation?
“Down-valuation” is the phrase commonly used when the valuation carried out for the mortgage lender comes back lower than the price a buyer has agreed to pay.
For example, you might agree to buy a house for £300,000 but the lender's valuation assesses it at £285,000. The £15,000 difference is what people generally mean when they say the property has been “down-valued”.
Importantly, that doesn't necessarily mean somebody has made a mistake. The price a particular buyer is willing to pay and the market value a valuer reports for lending purposes are not necessarily the same thing.
Technically, “down-valuation” isn't a formal valuation term. It's simply the commonly used description for a lender's mortgage valuation being lower than the agreed purchase price.
Why does a lower mortgage valuation matter?
Your lender isn't just deciding whether it is happy to lend to you. It also needs to be comfortable with the property being used as security for the mortgage.
The amount you can borrow is therefore connected to the lender's accepted value of the property. If that value is lower than expected, the numbers behind the mortgage can change.
One of the most important numbers is your loan-to-value, or LTV. This compares the amount being borrowed with the property's value. Mortgage products are often available within particular LTV bands, so a lower valuation can sometimes affect both how much can be borrowed and which mortgage products are available.
What does a down-valuation look like in practice?
A simple example makes the problem much easier to understand.
Example: you've agreed to buy for £300,000
Imagine you planned to put down a 10% deposit of £30,000 and borrow £270,000.
If the lender now values the property at £285,000, that £270,000 mortgage represents roughly 95% of the lender's valuation, rather than 90% of the £300,000 purchase price.
That could mean the original mortgage product is no longer suitable or available. It doesn't automatically end the purchase — but the numbers now need looking at again.
Why might a lender value the house lower than the agreed price?
There can be several reasons. Sometimes the agreed sale price simply isn't supported by enough comparable recent sales in the local market. In other cases, the property itself may have characteristics or issues that affect the valuation.
Comparable sales
The valuer may look at evidence from comparable properties and conclude that the agreed price is above the market value supported by that evidence.
The property's condition
Defects or concerns identified during the valuation may affect the value attributed to the property.
Limited evidence
Unusual properties or areas with fewer recent comparable transactions can make valuation more difficult and require greater professional judgement.
The buyer has offered a premium
Sometimes a property is simply worth more to one particular buyer than the wider market evidence supports. That doesn't necessarily mean the buyer shouldn't pay it, but the lender may not be willing to lend against that additional amount.
What are your options if the house is down-valued?
A lower valuation isn't automatically the end of the purchase. The right response depends on the size of the difference, your deposit, the lender, the mortgage product and how keen both you and the seller are to proceed.
1. Renegotiate the purchase price
You can go back to the seller and ask whether they are willing to reduce the price. They don't have to agree, but the valuation may give you useful information for that conversation.
2. Increase your contribution
If you have additional funds available, it may be possible to put more money into the purchase. Whether that is sensible is a separate question — don't leave yourself without an appropriate financial buffer simply to rescue a purchase.
3. Review the mortgage product
The lower valuation may move the mortgage into another LTV band. Depending on the lender and your circumstances, another mortgage product may be available.
4. Consider another lender
In some circumstances your broker may consider whether another lender is appropriate. However, changing lender doesn't guarantee a higher valuation — another valuer may reach the same or a similar conclusion.
5. Ask whether the valuation can be reconsidered
Depending on the lender, there may be a process for asking for the valuation to be reviewed. Usually, useful evidence is much more important than simply disagreeing with the figure.
6. Decide not to proceed
Sometimes the numbers simply stop making sense. Walking away from a property you love isn't an easy decision, but proceeding at any cost isn't automatically the right one either.
Can you challenge a mortgage down-valuation?
Potentially, although the process varies by lender and there is no guarantee that a valuation will be changed.
If a lender allows a valuation to be reconsidered, it will usually need meaningful evidence. That could include genuinely comparable properties that have recently sold and support a different value.
An estate agent saying they believe the property is worth more isn't necessarily enough on its own. Asking prices aren't the same as completed sale evidence, and the mortgage valuer is carrying out the valuation for lending purposes.
A challenge needs evidence. The useful question isn't simply “Do we think the house is worth more?” but whether there is credible market evidence to support a higher valuation.
Is a mortgage valuation the same as a house survey?
No. This is an important distinction for buyers.
The lender's mortgage valuation is primarily there to help the lender decide whether the property provides suitable security for the mortgage. It shouldn't be treated as a detailed assessment of the property's condition for your benefit.
A Home Survey is a separate inspection designed to give you more information about the condition of the property. Depending on the type of property and survey chosen, that can help identify defects or areas that may need further investigation.
So even if the lender is perfectly happy with its valuation, that doesn't mean a buyer should assume the property has had a comprehensive survey.
Can you still buy the house for the original price?
Potentially, yes. A lender valuing a property below the agreed purchase price doesn't necessarily prevent you and the seller from proceeding at the original price.
The issue is how the purchase will be funded. If the lender is only prepared to lend based on the lower valuation, you may need to contribute more of your own money or use a different mortgage arrangement if one is available.
Before doing that, it's worth thinking beyond the emotion of wanting to secure the property. Ask yourself what paying the additional amount would do to your savings, emergency fund, moving budget and plans for work needed after completion.
Being technically able to bridge the gap doesn't automatically make doing so the right financial decision.
Your mortgage valuation has come back low. What should you do next?
Find out exactly what the lender has said
Start with the actual valuation and mortgage position rather than assuming the application has been declined.
Ask your mortgage adviser to recalculate the options
Your adviser can establish what the lower value does to the loan-to-value, borrowing and mortgage product.
Decide whether to renegotiate
If you want to continue with the property, the valuation may form part of a conversation with the estate agent and seller about the agreed price.
Compare the realistic routes forward
That might mean changing the deposit, mortgage product, lender or purchase price — or deciding that the property no longer works for you.
What if you're a first-time buyer?
A down-valuation can feel particularly alarming when it's your first purchase because it often arrives after you've already spent time finding the property, negotiating an offer and starting the mortgage process.
But don't assume it means you've lost the house. The first step is simply to understand the size of the difference and what it actually changes about the mortgage.
If you're still getting to grips with the wider buying process, our First-Time Buyer Guide explains the journey from preparing to buy through to mortgage application and completion.
Related mortgage guides
FAQs
It means the mortgage lender's valuation of the property is lower than the price you've agreed to pay. This can affect the amount the lender is willing to lend or the loan-to-value of the mortgage.
Not necessarily. A lower valuation can change how much the lender is prepared to lend or the mortgage product available, but there may still be ways to proceed.
You can ask the seller to renegotiate the price. Whether they agree is up to them, but a lower lender valuation may form part of that discussion.
Some lenders have a process for asking for a valuation to be reconsidered. Usually you'll need credible evidence, such as suitable recent comparable sales. The process and evidence required vary by lender.
Possibly, but there is no guarantee. A different valuation may reach a different conclusion, but it may also produce the same or a similar figure. Changing lender should therefore be considered as part of the wider mortgage options rather than treated as a guaranteed way around a lower valuation.
Potentially, yes. You may be able to renegotiate the price, contribute more of your own money, use another suitable mortgage product or explore another lender. Your available options depend on your individual circumstances.
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