You've found the house. Your offer has been accepted. You've applied for your mortgage.

Then comes the news you really didn't want:

The mortgage lender thinks the property is worth less than you've agreed to pay.

This is known as a mortgage down valuation, and while it can feel like your purchase is suddenly falling apart, it doesn't necessarily mean the end of the road.

So, what actually happens if a lender down values a property, and what can you do about it?

What Is a Mortgage Down Valuation?

When you apply for a mortgage, the lender will normally arrange a mortgage valuation.

It's important to understand that this valuation is primarily for the lender's benefit. They want to check that the property provides sufficient security for the amount they're being asked to lend.

Imagine you've agreed to buy a property for £300,000.

The lender's valuation comes back at £285,000.

That's a £15,000 down valuation.

You can still believe the house is worth £300,000. The seller can still believe it's worth £300,000. But as far as that mortgage application is concerned, the lender may base its calculations on £285,000.

And that's where the problem can arise.

Why Do Mortgage Lenders Down Value Properties?

There isn't always one obvious reason.

The valuer will typically consider recent comparable sales, the condition of the property, its location and current market conditions.

A property might be down valued because similar homes nearby have recently sold for less.

Perhaps the asking price was optimistic, or competition between buyers pushed the agreed price above what comparable evidence supports.

There could also be concerns about the property's condition, construction or required repairs.

In a changing UK property market, valuers may also take a cautious approach when there is uncertainty around property prices.

How Does a Down Valuation Affect Your Mortgage?

This is where loan-to-value (LTV) becomes important.

Suppose you're buying for £300,000 with a £30,000 deposit.

You want to borrow £270,000, giving you what appears to be a 90% LTV mortgage.

But if the lender values the property at £285,000, the calculation changes.

The lender may no longer be prepared to lend the full £270,000 under that particular mortgage product.

You could therefore find yourself with a mortgage shortfall.

This doesn't necessarily mean your mortgage has been declined. It means you need to work out how, or whether, that gap can be bridged.

Option 1: Renegotiate the Purchase Price

One of the first options is to go back to the seller.

If you've agreed £300,000 but the mortgage valuation is £285,000, you could try to renegotiate the purchase price.

The seller doesn't have to agree.

However, a down valuation can provide useful evidence that the agreed price may be difficult to achieve with another mortgaged buyer too.

Sometimes buyer and seller agree a new price. Other times they meet somewhere in the middle.

Option 2: Increase Your Deposit

Another possibility is contributing more of your own money.

If the lender won't provide the amount you originally expected, a larger deposit could potentially bridge the difference.

But be careful here.

Don't automatically empty your savings simply because you've fallen in love with the property.

You'll still have moving costs and potentially repairs, furniture and other expenses once you've completed.

It's worth asking whether paying significantly above the lender's valuation is something you're genuinely comfortable doing.

Option 3: Challenge the Valuation

Can you appeal a mortgage valuation?

Potentially, although successfully challenging a down valuation isn't always straightforward.

A lender may allow the valuation to be reconsidered if there's strong evidence supporting a higher figure.

That could include recent sales of genuinely comparable properties in the local area.

Simply pointing to other properties currently advertised for higher prices may not be enough. Asking prices and actual sold prices are two very different things.

The lender will have its own process for valuation appeals, so it's worth understanding exactly what evidence they require.

Option 4: Consider Another Mortgage Lender

Different lenders can use different valuation firms, criteria and processes.

That means another lender could potentially reach a different valuation.

But there are no guarantees.

Switching lender can also mean starting another application, undergoing another valuation and potentially paying additional costs.

And if several independent valuers reach similar conclusions, it may be worth considering whether the agreed purchase price really is too high.

Should You Walk Away?

Sometimes, yes.

A down valuation can be frustrating, particularly when you've already spent money on solicitors, surveys and your mortgage application.

But it can also be useful information.

If you're being asked to contribute substantially more cash to buy a property that an independent professional believes is worth less, take a moment to consider the implications.

How long do you plan to live there? Would you be comfortable if the property's value didn't increase for several years? Would using more of your savings leave you financially stretched?

Walking away from a property you love isn't easy.

But neither is starting homeownership with little savings and a property you've potentially overpaid for.

A Down Valuation Doesn't Automatically Mean It's Over

If your mortgage lender values your property lower than your offer, don't panic.

First, understand exactly how the valuation affects your mortgage.

You may be able to renegotiate the purchase price, increase your deposit, provide evidence to challenge the valuation or consider another lender.

The important thing is not to make an emotional decision simply because you're worried about losing the property.

Look at the numbers. Understand your options. And think about whether the purchase still makes sense for you.

Because sometimes a down valuation is an obstacle that can be overcome.

And sometimes it's useful information that could stop you paying more for a property than you should.

At HLC Mortgages, we’ll take the time to understand your plans, explain your options in plain English and help you find the most suitable solution for your move.

We’re here to make the mortgage side of moving home as straightforward as possible.

Contact us today!

Your home may be repossessed if you do not keep up repayments on your mortgage.