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A valuation is a process whereby a mortgage lender requires a property to be valued prior to granting the loan for the buyer to purchase it. This is done for the benefit of the lender, as they want to make sure the property is worth the amount requested for a mortgage on it.
Various elements go into the valuation to produce the final value of the property. This does not only concern the property itself, but also the area and the state of the housing market. For example, assuming the property is in excellent condition, it could be valued higher one year compared to the next. This might occur if the property market takes a dip from one year to the next. It shows how the market and other similar properties nearby have an influence on the final valuation.
It is important to understand that the valuation received by an estate agent could differ from one produced by a surveyor acting on behalf of the lender. While there shouldn’t be too much difference between them, a surveyor produces an accurate valuation based on various factors. They are not trying to win your custom, unlike an estate agent.
Similarly, if you find a property you like and make an offer of £260,000 on it, for example, you may find the valuation produced by the lender is lower than the amount you offered on the property. If that is the case, you would need to work out how to meet the shortfall between the two figures. The mortgage lender would never lend more than the amount determined from their valuation.
A valuation fee is a charge levied by the bank or building society that intends to lend you your mortgage. It refers to the process of valuing a property to discover how much it is worth. The mortgage valuation helps the lender to confirm it is worth enough to cover the amount they are considering lending to you to buy it.
The valuation fee is normally paid in advance of the mortgage valuation taking place. When you apply for a mortgage, you should be informed how much the valuation fee will be and when you need to pay it. Typically, the fee isn’t refundable if something should occur that causes you to withdraw from the mortgage application. If, however, you pull out prior to the valuation taking place, you may be able to seek a refund. You should read the terms and conditions relating to the mortgage and the various fees associated with it. This should tell you whether a refund may be due under certain circumstances (as well as how much all mortgage fees would be).
It is important to remember that the valuation fee is for the benefit of the lender and not the buyer. The valuation merely gives an impression of how much the property is worth. It does not go into detail about the features or condition of the property other than what is obvious from a basic glance. That means you must request your own survey (for example, a Homebuyers Survey) to get a better idea of what you are buying. In the case of older properties or those that clearly need work, a full structural survey would be a better idea.
A variable interest rate is just that – variable. While a fixed rate of interest stays at the advertised rate for a set time, perhaps a year or more, a variable interest rate can fluctuate at any time. In terms of a mortgage, one that has a variable interest rate is usually referred to simply as a variable rate mortgage.
There are two versions of a variable rate, however. One is a standard variable rate, often abbreviated to SVR. The other is a tracker interest rate. This tracks the current base rate, while being positioned slightly above it. For example, if the base rate is 0.5%, your interest rate might be 1.5% above that at 2%. If the base rate goes up to 1%, your interest rate would go up by 1.5% to 2.5% instead.
There are pros and cons to accepting a home loan with a variable rate rather than a fixed rate. Many people opt for a fixed rate because they know exactly what the applicable rate will be for the agreed period. However, a fixed rate tends to be higher than a variable rate deal if interest rates are low. Of course, a variable rate puts you at risk of seeing it rise if the base rate goes up. Lenders are typically quick to pass on any rises in the Bank of England base rate when they occur. It is possible, however, that a lender might alter their standard variable rate for other reasons, so this is something to be aware of.
There is always an element of risk involved with a variable interest rate. You may find you can get a far lower monthly repayment with such a deal, yet you are at risk of future rises in the base rate too.
A vendor is a person who is selling a property or a piece of land. However, it does not necessarily mean that person has ownership of the entire property. The best example is a situation whereby someone with a mortgage wishes to sell their home. The property might be worth £500,000 but the vendor still has a mortgage worth £250,000 on that property. As such, the vendor is legally permitted to sell the property, but technically they only own half of it. The lender of the mortgage would own the remaining half.
The vendor can choose to sell their property via an estate agent if they wish. This is still the most popular route to selling property in the UK. There is no legal requirement to go through an estate agent, however. It is possible for a vendor to sell their home on their own by advertising it, managing viewings, and then dealing with the process of passing ownership on to the buyer. However, the process is very involved and requires considerable knowledge to make sure it is done correctly. Most people are happy to pass the work onto the professionals.
Others choose services that allow the vendor to pick and choose which elements they are prepared to do themselves. For example, you could take your own photos, manage viewings, and then get the professionals in when it comes to handling the paperwork, transfer of ownership, and surveys. One advantage of using an estate agent is that your property would likely be seen by more people in the area. Advertising online and in their office would be part of the service they would provide to the vendor.