Your mortgage and survey
This guide provides you with basic information about mortgages and surveys. We are here to talk to you about your specific circumstances, or explain anything in full throughout the transaction.
Mortgages: The basics
Most people understand the basic principle of a mortgage. The mortgage company lends you a sum of money and secures your liability to repay the debt by a charge registered against your property. Failure to pay the mortgage instalments can result in the property being repossessed and sold by the lender. You will remain liable to the lender for any shortfall.
Mortgages are either “repayment” where the monthly sum you pay to the mortgage lender includes a small repayment of the capital; or “interest only” where you only pay interest each month and make a separate payment into an endowment. It is intended that at the end of the mortgage term the endowment policy matures, pays off the capital owing on the mortgage and provides some extra capital.
Given the recent trend for low interest rates and problems with endowment policy payouts “interest only” mortgages are fairly rare nowadays.
Your mortgage offer documents usually include a copy of the mortgage lender’s valuation report. This has been produced by a surveyor after inspecting the property. It is not a comprehensive house survey; it merely provides the mortgage company with the information it requires when deciding whether to accept the property as suitable security.
You must not accept the valuation report as a guarantee that the property is free from defects.
Unless the property has the benefit of an NHBC guarantee or similar then you should consider having an independent survey carried out.
If asked we always advise clients to have their property independently surveyed. If you do decide to have an independent survey then make sure you instruct your surveyor to investigate any particular matters which
concern you, for example: drains, water supply, electrical installation, central heating.
You may not consider the cost of an independent surveyor’s report worthwhile.
However, the report may:
- Identify problems with the property or area which you could not have foreseen and warn you against buying the property at all.
- Identify matters that require repair/remedial work which you had not been aware of when negotiating the purchase price. This will assist you to re-negotiate the price at a later stage.
- Identify matters which will need your attention in the near future and give you an idea of what your house maintenance commitment is likely to be.
- Give the property a clean bill of health and you peace of mind. If you commission an independent survey and the report subsequently turns out to contain negligent advice you may be able to secure compensation from the surveyor’s insurance.
If you do not have an independent survey and a defect is subsequently discovered in the fabric of the property you will not automatically have any claim against the seller, the mortgage lender or the mortgage lender’s surveyor.
Your mortgage offer will detail the rate of interest currently payable and how increases will be notified to you. If you have a fixed rate mortgage or one where a reduced rate is payable for a certain period of time, then the mortgage lender will generally impose a penalty on you if you wish to redeem the mortgage within the period of the fixed or reduced rate (or longer). Some mortgage lenders impose such a penalty even if you are paying interest at their standard rate.
It is impossible for us to anticipate all the different ways in which mortgage lenders express these conditions. You must read the mortgage offer documents carefully. If there are any matters that you would like us to explain more fully then do not hesitate to ask us.
Interest is payable from the date we receive funds from your mortgage lender. This may be a few days before the actual completion date. The reason is that on the completion date we can only use cleared funds for your purchase.
Mortgage lenders vary greatly in fixing the date on which the first instalment falls due. Check with your lender how this date will be fixed in your case.