Mortgage Declined After Valuation: What You Need to Know

Applying for a mortgage can be both exciting and stressful, especially when you’re one step closer to owning your dream home. However, what happens if your mortgage is declined after valuation? It’s a common scenario in the UK, leaving many prospective homeowners frustrated and confused. This guide explains why it happens, what you can do about it, and how to avoid issues in the future.

What Is a Property Valuation?

A property valuation is an assessment conducted to determine the market value of a property. This process is carried out by a qualified surveyor or valuer who considers various factors, such as the property’s location, size, condition, and comparable sales in the area. Property valuations are essential for buyers, sellers, and lenders as they provide an accurate estimate of what a property is worth in the current market.

What Is the Purpose of a Mortgage Valuation?

A mortgage valuation is specifically conducted for the benefit of the lender to ensure the property is a suitable security for the loan. The valuation helps the lender confirm that the property’s value aligns with the amount being borrowed. It protects the lender by ensuring they would be able to recover their money if the borrower defaults and the property needs to be sold. While it provides basic information about the property’s value, it is not a detailed survey and may not highlight structural or other issues.

What Does ‘Declined After Valuation’ Mean?

A mortgage being declined after valuation typically occurs when the lender’s property valuation doesn’t align with their lending criteria. This means the lender, after reviewing the property and its value, decides not to approve the loan. While your initial application and financial assessment might have been successful, the property itself must meet specific requirements for the mortgage to proceed.

What Does a Property Valuation Take Into Consideration?

A property valuation involves a detailed assessment of various factors that influence the market value of a property. Here’s what is typically considered during the process:

Property Location

The location plays a significant role in determining a property’s value. Factors like proximity to amenities (schools, transport links, shops), neighbourhood desirability, crime rates, and local demand directly impact the valuation.

Property Size and Layout

The size of the property, including the total square footage and number of bedrooms and bathrooms, is a key determinant. The layout and functionality of the space, such as open-plan living areas or additional features like a garage or garden, also add value.

Property Condition

The overall condition of the property, including its structural integrity, maintenance, and aesthetic appeal, is carefully evaluated. Well-maintained or newly renovated properties typically command higher valuations than those requiring significant repairs.

Comparable Properties

The valuer considers recent sales of similar properties in the same area. These “comparables” help establish a benchmark for the property’s market value.

Age and Build Quality

Older properties may require more maintenance or come with structural concerns, which can lower the valuation. On the other hand, high-quality builds or properties with historical significance may increase in value.

Property Features and Extras

Additional features like modern kitchens, en-suite bathrooms, double glazing, energy efficiency improvements, or premium fittings can positively influence the valuation. Outdoor space, such as gardens, terraces, or balconies, also adds value.

Leasehold or Freehold Status

If the property is leasehold, the valuer will consider the remaining years on the lease, ground rent, and service charges. A short lease can significantly lower a property’s valuation compared to freehold properties.

Market Trends

The state of the local and national property market affects the valuation. Rising or falling property prices, interest rates, and economic conditions are taken into account to ensure the valuation reflects current trends.

Environmental and Local Risks

Properties located in flood-prone areas, near busy roads, or close to industrial zones may be valued lower due to potential risks or reduced desirability.

By examining these factors, a valuer provides an accurate estimate of the property’s worth, ensuring that it aligns with market conditions and meets the needs of buyers, sellers, or lenders.

Reasons for a Mortgage Being Declined After Valuation

Here are the most common reasons why a lender may reject a mortgage after valuation in the UK:

Undervalued Property

One of the most common reasons is when the lender’s valuation is lower than the agreed purchase price. For example, if you’ve agreed to buy a property for £250,000, but the lender values it at £230,000, they may consider it too risky. This could mean you’d need a higher deposit to cover the difference.

Structural Issues

If the property has significant structural defects, such as subsidence, damp, or poor maintenance, it can lead to a mortgage refusal. These issues raise red flags for lenders as they may impact the property’s long-term value or marketability.

Property Type

Certain types of properties, such as those with non-standard construction (e.g., concrete, timber-framed, or thatched roofs), can be harder to secure a mortgage against. Lenders often view these properties as riskier investments.

Location Risks

Properties in areas prone to flooding, subsidence, or environmental risks may be deemed unsuitable for lending. Similarly, homes near commercial premises or high-crime areas might raise concerns.

Leasehold Concerns

If you’re purchasing a leasehold property, the lender will scrutinise the lease terms. Short leaseholds (typically under 80 years), high ground rent charges, or unclear ownership terms can lead to a declined application.

Buyer Affordability or Credit Issues

In some cases, issues discovered during the valuation process might prompt a lender to re-examine your financial situation. This could result in a refusal if new concerns about your affordability or creditworthiness arise.

What to Do If Your Mortgage Is Declined After Valuation

Being declined at this stage isn’t the end of the road. Here’s what you can do:

Understand the Reason

Ask your lender or mortgage broker for a detailed explanation. Understanding why your mortgage was declined will help you address the issue effectively.

Negotiate the Property Price

If the property was undervalued, consider renegotiating the price with the seller. They may agree to lower the price, especially if other buyers face the same issue.

Provide a Larger Deposit

A larger deposit can reduce the lender’s risk and may help in situations where the property was undervalued. This approach might also make you eligible for a different mortgage product.

Consider a Specialist Lender

If your property type or situation is unique, mainstream lenders might not be the best option. Specialist lenders are more flexible with non-standard properties or challenging circumstances.

Get a Second Opinion

Not all valuations are equal. If you believe the lender’s valuation is unfair, you can arrange for an independent valuation or switch to another lender for a second opinion.

Fix Structural or Legal Issues

If structural problems or leasehold concerns were flagged, work with the seller to resolve them. For instance, you could negotiate repairs or ensure lease terms are updated.

Why Was I Asked to Acquire Additional Reports Regarding My Mortgage Valuation?

During the mortgage process, lenders may request additional reports following the initial property valuation. This typically occurs when the valuer identifies potential issues that require further investigation to ensure the property is a suitable security for the loan. While this may seem inconvenient, it’s a standard part of the lender’s due diligence process. Below are the common reasons why you might be asked to acquire additional reports and what they mean.

Structural Issues

If the valuer notices potential structural defects—such as cracks in the walls, evidence of subsidence, or signs of damp—they may recommend a structural survey or specialist report. This helps determine the severity of the issue and whether it could affect the property’s long-term value.

• Example: A valuer might suspect subsidence due to uneven flooring or visible cracks. They could request a structural engineer’s report to confirm if the issue is manageable or requires costly repairs.

Damp or Rot Concerns

Signs of dampness, water ingress, or wood rot could trigger a request for a damp survey or a timber report. These problems may impact the property’s liability and maintenance costs, leading the lender to seek clarification.

• Example: If black mould or water stains are spotted during the valuation, a specialist damp survey might be needed to determine the source and extent of the issue.

Roof or Exterior Problems

Aging roofs, missing tiles, or visible damage to the property’s exterior may prompt the need for a roof inspection or external condition report. These issues could indicate high repair costs or a reduced lifespan for key structural elements.

• Example: The valuer may flag concerns if the property’s roof looks old or damaged, requiring an expert assessment to confirm its condition.

Electrical or Gas Safety Concerns

If the property’s electrical or gas systems appear outdated or potentially unsafe, a gas safety check or electrical inspection may be requested. Lenders want assurance that these essential systems meet safety standards.

• Example: If the property hasn’t been updated for decades, the lender might request an electrician’s report to confirm the wiring is safe and compliant with modern regulations.

Environmental Risks

Properties located in areas prone to flooding, subsidence, or contamination may require additional reports, such as a flood risk assessment, mining survey, or environmental impact report.

• Example: If the property is near a river or in a high-risk flood zone, the lender may want confirmation of its flood resilience or insurance options.

Leasehold or Legal Issues

For leasehold properties, lenders may request additional documentation or a solicitor’s report to clarify details such as the length of the lease, ground rent obligations, or potential restrictions in the lease agreement.

• Example: If the lease has fewer than 80 years remaining, the lender may request further information about the cost and process of extending it.

Non-Standard Construction

If the property is built using materials or methods considered non-standard—such as concrete, timber frames, or thatched roofs—the lender may require a construction report or survey to assess its longevity and insurability.

• Example: A prefabricated home may require a specialist assessment to confirm its structural soundness and marketability.

Why Are These Reports Important?

Lenders request additional reports to:

• Ensure the property is a secure investment.
• Avoid financial risks associated with hidden defects or legal complications.
• Protect borrowers from purchasing a home with unforeseen maintenance costs or safety issues.

These reports allow lenders to make an informed decision about whether to approve the mortgage or suggest adjustments, such as a reduced loan amount or additional conditions.

Who Pays for the Additional Reports?

The responsibility for paying for these reports typically falls on the buyer. While this may add to your upfront costs, it’s in your best interest to ensure the property you’re buying is safe, structurally sound, and worth the agreed price.

What to Do If You’ve Been Declined at Valuation by a Specific Lender

Being declined for a mortgage after a valuation can be disheartening, but it doesn’t mean your property-buying journey is over. If a specific lender has rejected your mortgage following a valuation, there are several steps you can take to address the situation and find a way forward. Here’s how to proceed:

Understand the Reason for the Decline

Start by asking the lender or your mortgage broker for a clear explanation of why the mortgage was declined. The reason could fall into one of the following categories:

• The property was undervalued compared to the agreed purchase price.
• Structural issues or defects were identified.
• The property type (e.g., non-standard construction) didn’t meet the lender’s criteria.
• Leasehold concerns were flagged (e.g., a short lease or onerous terms).
• Risks associated with the location (e.g., flood zones or subsidence risks).

Knowing the exact reason will help you determine your next steps and address the issue.

Consider Alternative Lenders

Different lenders have varying criteria for property valuations. If one lender has declined your mortgage, it doesn’t mean another lender will do the same. Consider the following:

• Specialist Lenders: Some lenders specialise in unusual properties, such as non-standard construction homes or properties with structural issues.
• Independent Valuations: Choose a lender that allows independent valuations if you believe the original valuation was too low.
• Mortgage Brokers: Work with an experienced broker who can identify lenders more likely to approve your application based on your specific circumstances.

Negotiate with the seller

If the property was undervalued, you may need to renegotiate the purchase price with the seller. Explain the situation and present the lender’s valuation report as evidence. Many sellers are willing to adjust the price, especially if other buyers face the same valuation issue.

Increase Your Deposit

If the lender’s valuation came in lower than the purchase price, you might need to bridge the gap by increasing your deposit. For example, if the agreed price is £250,000 but the valuation is £230,000, offering a larger deposit can reduce the lender’s risk and improve your chances of approval.

Address Structural or Legal Issues

If the lender flagged structural problems or leasehold concerns, take steps to resolve these issues:

• Structural Repairs: Negotiate with the seller to carry out necessary repairs before proceeding.
• Lease Extension: If the lease is too short, consider asking the seller to extend it as part of the sale.
• Legal Clarifications: Address any uncertainties regarding lease terms, ground rent, or property ownership.

Dispute the Valuation

If you believe the lender’s valuation is inaccurate, you can challenge it. Provide evidence of comparable property sales in the area to support your case. However, keep in mind that lenders are not obligated to change their decision.

Explore Other Financing Options

If traditional lenders continue to reject your application, you might explore alternative financing options, such as:

• Bridging Loans: Temporary loans to cover the property purchase until a longer-term solution is found.
• Joint Ownership Schemes: Shared ownership or help-to-buy schemes may be an option if affordability is the issue.
• Private Lending: Private lenders or peer-to-peer lending platforms may be more flexible with valuations.

Take a Step Back if Necessary

Sometimes, it’s best to step back and reassess your situation. This might mean considering a different property or waiting until you’re in a stronger financial position to increase your deposit or handle unexpected costs.

How to Prevent Your Mortgage Being Declined After Valuation

To avoid the stress of rejection, take these proactive steps:

Work With an Experienced

Broker
Mortgage brokers are familiar with lenders’ criteria and can help you identify potential risks early in the process.

Choose a Surveyor Wisely


If you’re commissioning your own survey, opt for a qualified surveyor with experience in the local property market.

Check the Property

Thoroughly
Before making an offer, assess the property’s condition and history. Look for signs of structural issues or leasehold problems that might impact your mortgage application.

Budget for Potential Shortfalls

Prepare for the possibility of needing a larger deposit if the valuation comes in lower than expected.

How a Mortgage Broker Can Help

If you’ve been declined by a specific lender, a mortgage broker can be invaluable. They can:

• Recommend lenders with more flexible criteria.
• Provide advice tailored to your financial situation.
• Help you navigate complex property issues.
• Speed up the process of finding a new

FAQs

Continue Reading