You’ve agreed to buy a property for £500,000. Your offer has been accepted, your mortgage application is underway, and everything appears to be progressing normally.
Then the mortgage valuation comes back at £475,000. What happens now?
This is known as a mortgage down valuation, and it can create a funding gap between the price you’ve agreed to pay and the amount your mortgage lender is prepared to lend against.
But a down valuation doesn’t necessarily mean the purchase is over. Depending on the circumstances, you may be able to renegotiate the purchase price, increase your deposit, reduce the mortgage, challenge the valuation or approach another lender. This guide explains the mortgage down-valuation impact on your borrowing and what to do next.
Quick Answer: What If My Mortgage Valuation Is Less Than The Offer?
If your mortgage lender values the property below the price you’ve agreed to pay, it may calculate your mortgage using its lower valuation rather than the purchase price. This can reduce the amount you’re able to borrow and potentially change your loan-to-value (LTV).
For example:
Agreed purchase price: £500,000
Deposit: £50,000
Mortgage required: £450,000
Original LTV: 90%
If the lender values the property at £475,000, a £450,000 mortgage would represent approximately 94.7% of the lender’s valuation. If your chosen mortgage is only available up to 90% LTV, the lender may no longer be prepared to lend the full £450,000. You then need to decide how to deal with the shortfall.
What Is a Mortgage Down Valuation?
A mortgage down valuation happens when a lender’s valuation of a property is lower than the price the buyer has agreed to pay. The lender isn’t valuing the property simply to tell you whether you’ve negotiated a good deal. It’s assessing whether the property represents suitable security for the mortgage.
If you’re borrowing £450,000 against a property you’re buying for £500,000, the lender needs to be comfortable with the value of the asset securing that debt. If its valuer believes the property is worth £475,000 instead, the lender may base its mortgage calculations on that lower figure.
What Causes a Mortgage Down Valuation?
There are several possible reasons.
Comparable properties have sold for less
Valuers typically consider evidence from comparable local properties. If similar homes have recently sold below the price you’ve agreed, the valuer may conclude that your purchase price is above the current market value.
The property market has changed
Property prices can change between a home being listed and a mortgage valuation taking place. This can be particularly relevant in a slower market where asking prices and achieved sale prices are diverging.
The property has defects
Structural problems, damp, roof issues or other defects can affect the lender’s assessment. In some circumstances, the lender may also retain part of the mortgage until particular work has been completed.
The property is unusual
Non-standard construction, unusual locations, short leases, flats above commercial premises and other property characteristics can sometimes affect valuation or lender appetite.
The agreed price is simply too high
Sometimes a buyer has agreed to pay more than the valuer believes the property is currently worth. This can happen in competitive markets, particularly where several buyers have bid against one another.
How to Avoid a Mortgage Down Valuation
There is no guaranteed way to avoid a down valuation because the lender’s valuer will make an independent assessment of the property.
However, buyers can reduce the risk of unexpected problems by researching recent sold prices for comparable properties before making an offer, considering the property’s condition and avoiding relying solely on the asking price when deciding how much to pay.
If you’re buying an unusual property, such as a home with non-standard construction, a short-lease flat or a flat above commercial premises, it can also be worth discussing the property with your mortgage adviser before submitting an application.
Ultimately, the lender’s valuation is outside the buyer’s control. The objective isn’t to guarantee a particular valuation, but to make an informed offer and identify potential mortgageability issues as early as possible.
Does a Down Valuation Mean My Mortgage Will Be Declined?
Not necessarily. A down valuation is primarily a problem with the property value and LTV, rather than necessarily a problem with you as a borrower. The lender might still be willing to provide a mortgage, but the amount or product available could change.
For example:
Purchase price: £600,000
Mortgage required: £480,000
Expected LTV: 80%
If the lender values the property at £570,000:
£480,000 ÷ £570,000 = approximately 84.2% LTV
Your original 80% LTV mortgage product may therefore no longer fit. You might need a mortgage available at a higher LTV, a larger deposit or a reduction in the purchase price.
How Much Extra Deposit Might I Need After a Down Valuation?
This depends on the lender’s valuation and the maximum LTV of your mortgage.
Suppose:
Purchase price: £500,000
Original deposit: £50,000
Mortgage required: £450,000
The lender values the property at £475,000.
At 90% LTV, the maximum mortgage based on that valuation would be:
£475,000 × 90% = £427,500
If the seller still wants £500,000, you would need:
£500,000 – £427,500 = £72,500
Your cash contribution has therefore increased from £50,000 to £72,500. An additional £22,500. That’s why a relatively modest difference in valuation can create a significant problem for buyers with smaller deposits.
Can I Renegotiate the House Price After a Down Valuation?
Yes. A mortgage down valuation can provide a legitimate reason to reopen negotiations with the seller. The seller doesn’t have to accept a lower price, but they also need to consider whether another buyer using mortgage finance could encounter the same problem.
For example, if you’ve agreed £500,000 but the lender values the property at £475,000, you might ask the seller to reduce the price. The eventual solution doesn’t necessarily have to be £475,000.
Buyer and seller could potentially agree somewhere in between. Your estate agent can communicate the valuation issue to the seller and help with negotiations.
For buyers dealing with a down valuation, it’s important to look at both the mortgage shortfall and whether the agreed purchase price still represents a price you’re comfortable paying.
Can I Challenge a Mortgage Valuation?
Potentially, although successfully overturning a valuation isn’t guaranteed. Lenders usually have procedures for valuation appeals or challenges, but they may require strong evidence. This could include recent comparable sales demonstrating that similar properties have achieved prices closer to your agreed purchase price. Simply disagreeing with the valuation is unlikely to be enough.
The lender or valuer may also specify what evidence can be submitted and what qualifies as an appropriate comparable property. Before challenging a valuation, it’s therefore worth establishing whether there is credible evidence to support a higher figure.
Can I Apply to Another Mortgage Lender After a Down Valuation?
Potentially, yes. Different lenders can use different valuation firms, automated valuation models and assessment processes. A different lender could therefore reach a different conclusion about the property’s value. However, there is absolutely no guarantee that another lender will value the property more highly.
You also need to consider:
- Whether the new lender can provide the borrowing you need.
- Its mortgage rates and fees.
- Whether you meet its affordability criteria.
- Whether another valuation fee is required.
- How much time you have before exchange or completion.
- Whether changing lender could put the transaction at risk.
This is where speaking to a mortgage adviser can be particularly useful.
Has Your Property Been Down-Valued?
If your lender has valued the property below your agreed purchase price, it doesn’t necessarily mean your purchase has to fall through. Oportfolio can review the valuation, your mortgage, deposit and LTV and help you understand whether renegotiating, changing product or considering another lender could provide a realistic way forward.
Ask Oportfolio to Review My Mortgage
Oportfolio Insight: A Down Valuation Is a Property Problem That Can Become a Mortgage Problem
When buyers receive a down valuation, the immediate reaction is often that the lender won’t give them the mortgage. But it helps to separate two issues.
You may still comfortably pass the lender’s income and affordability assessment. The problem is that the property is no longer sitting at the LTV the mortgage was originally based on. That distinction matters because there may be several ways to solve it.
We’ve seen cases where negotiating the purchase price has worked. In others, a different lender, mortgage product or deposit structure may be more appropriate.
But when a property is down-valued, it’s important not to focus immediately on finding another lender. One of the questions we’d ask is: has the mortgage become the problem, or has the valuation revealed a problem with the price?
Finding another lender prepared to support the borrowing doesn’t automatically mean the original purchase price represents good value.
The first thing we’d want to establish is exactly why the valuation has created a problem. Once we know that, we can look at the available solutions rather than assuming either that the purchase has failed or that changing lender is automatically the answer.
Is a Down Valuation Actually Good for the Buyer?
It might feel like a disaster when it first happens, but occasionally a down valuation can prevent a buyer from overpaying. If an independent valuer believes the property is worth significantly less than your offer, it’s worth understanding why.
You may ultimately disagree and decide that you’re still comfortable paying the agreed price. But the valuation gives you another piece of information before committing hundreds of thousands of pounds to the purchase. It can also strengthen your position when renegotiating with the seller.
What Should I Do If My Property Is Down-Valued?
If you’ve just received a lower mortgage valuation, it doesn’t necessarily mean you need to abandon the purchase.
Start by establishing:
- What value has the lender given the property?
- How does that affect your mortgage and LTV?
- Can the purchase price be renegotiated?
- Could you increase your deposit without overstretching yourself?
- Is there credible evidence to challenge the valuation?
- Could another lender be appropriate?
- How much time do you have before exchange or completion?
Your mortgage adviser, estate agent and conveyancer may all have a role to play depending on the solution.
In Summary
A mortgage valuation coming in below your offer can be frustrating, but it doesn’t automatically mean your property purchase has failed. It can increase your effective LTV and reduce the amount a lender is prepared to advance, potentially creating a funding shortfall.
Depending on your circumstances, possible solutions include:
- Renegotiating the purchase price.
- Increasing your deposit.
- Changing mortgage product.
- Challenging the valuation.
- Considering another lender.
The right approach depends on why the property was down-valued and how the new figure affects your mortgage.
Has Your Property Been Down-Valued?
If your mortgage valuation has come back below the price you’ve agreed to pay, speak to Oportfolio before assuming the purchase can’t proceed. Our mortgage advisers can review how the valuation affects your borrowing, assess the available mortgage options and help you understand whether renegotiating, challenging the valuation, changing product or considering another lender could provide a realistic solution.
Speak to Oportfolio Mortgages and let us help you understand your next move.
Case Study: How We Helped a Buyer Overcome a £50,000 Mortgage Down Valuation
We’ve dealt with exactly this situation for a real Oportfolio client purchasing a residential property in London. The buyer had agreed to purchase the property for £750,000, but their mortgage lender valued it at just £700,000 – £50,000 below the agreed purchase price.
The Client
Our client was an employed professional with a strong credit profile.
Their original purchase looked relatively straightforward:
- Agreed purchase price: £750,000
- Deposit: £112,500
- Mortgage required: £637,500
- Original LTV: 85%
The problem only emerged when the lender instructed its mortgage valuation.
The Problem: A £42,500 Mortgage Shortfall
The lender’s surveyor valued the property at £700,000 rather than the agreed £750,000 purchase price.
At 85% LTV, the maximum mortgage based on a £700,000 valuation would have been:
£700,000 × 85% = £595,000
Our client originally required £637,500. That created a potential £42,500 mortgage shortfall.
Importantly, the client’s income wasn’t the problem. They could afford the mortgage they had originally requested. The issue was the relationship between the purchase price, lender valuation, deposit and LTV.
What We Did
Rather than immediately submitting another mortgage application, we reviewed the valuation and the wider transaction.
We considered:
- the lender’s valuation
- the agreed purchase price
- the client’s available deposit
- alternative LTV scenarios
- other suitable lender options
- the implications of proceeding at £750,000.
The client was also able to use the down valuation as part of their negotiations with the seller.
The Purchase Price Was Renegotiated
Following further discussions, the seller agreed to reduce the purchase price from £750,000 to £720,000. This reduced the gap between the agreed price and the original lender’s valuation. However, the client didn’t want to use substantially more of their savings to complete the purchase, so we also reviewed alternative mortgage options.
Finding an Alternative Mortgage Solution
We identified another lender whose mortgage criteria were suitable for the client’s circumstances and submitted the application using the newly agreed £720,000 purchase price. The new lender instructed its own valuation. This time, the property was valued at £720,000.
The revised purchase price and lender valuation therefore aligned, allowing the client to proceed at 85% LTV without having to find the £42,500 additional funding that the original valuation could have required.
A different lender will not necessarily value a property more highly, so changing lender should never be treated as a guaranteed solution to a down valuation.
The Result
Our client ultimately purchased the property for £720,000 – £30,000 below the price they had originally agreed to pay. They were able to proceed with an 85% LTV mortgage without having to plug the original £42,500 funding gap with additional savings. Most importantly, we didn’t look at the mortgage in isolation.
By reassessing the property price, deposit, LTV and mortgage options together, we were able to identify a realistic solution that allowed the purchase to proceed.
Speak to Oportfolio Mortgages and let us help you understand your next move.
