mortgage valuation: insurance

w00519772

i recently received a mortgage valuation report. The market value equalled the offer so the mortgage was approved. However, there is an entry on the valuation report called: insurance and this is about 92% of the market value. What is meant by insurance?

i don't believe it refers to building insurance but i am not sure.

dacouch

Does it describe it as "Rebuild costs" or "Reinstatement Value"

da_rule

It relates to the level of insurance you will need to have in place at exchange. This is to cover the cost of rebuilding the property should it fall down etc. This does seem high but it depends on the value of the property and the way it is built and how much it would cost to rebuild.

w00519772

da_rule wrote: »

It relates to the level of insurance you will need to have in place at exchange. This is to cover the cost of rebuilding the property should it fall down etc. This does seem high but it depends on the value of the property and the way it is built and how much it would cost to rebuild.

i agree it seems high if it refers to the rebuild value. The house was built in 2005. I read somewhere that rebuild costs are usually about one third of the inflated market value.

G_M

w00519772 wrote: »

i agree it seems night if it refers to the rebuild value. The house was built in 2005. I read somewhere that rebuild costs are usually about one third of the inflated market value.

depends on the type of construction.
on market values locally
on construction costs locally

In some places (a few) the rebuild cost for insurance is actually higher than the market value (I agree this is rare), but there is no hard rule about the relationship.

dacouch

w00519772 wrote: »

i agree it seems night if it refers to the rebuild value. The house was built in 2005. I read somewhere that rebuild costs are usually about one third of the inflated market value.

There is no exact rule and properties in less sought after areas will have a higher percentage of rebuild costs against value as opposed to areas such as London and the Southeast

tigsly

We had this on our valuation - so when i ring round for 'building insurance' from exchange this is the figure i'm trying to get cover for?!

phill99

The rebuilding cost bears no relation whatsoever to the market value.

It is exactly that: the cost of rebuilding the property in the event of total loss.

There are thousands of examples where the the rebuild value exceeds the open market value massively. This is very typical of terraced houses which have a higher rebuild cost due to the problems of shoring up adjacent properties, limited working space for plant etched. Also bear in mind that the reinstatement cost covers all associated professional fees such as architects, quantity surveyors, engineers fees, planning application fees, building reg fees etc etc.

As a student of surveying in Sheffield in the 1980s we did exercises based on valuations of local properties. It was very common to find terraced houses in poorer parts of the city with rebuild insurance values of 4 times the open market value. This is still the same in certain parts if the country.

phill99

tigsly wrote: »

We had this on our valuation - so when i ring round for 'building insurance' from exchange this is the figure i'm trying to get cover for?!

Correct.....

phill99

w00519772 wrote: »

. I read somewhere that rebuild costs are usually about one third of the inflated market value.

You read wrongly.

brenda10

w00519772 wrote: »

i recently received a mortgage valuation report. The market value equalled the offer so the mortgage was approved. However, there is an entry on the valuation report called: insurance and this is about 92% of the market value. What is meant by insurance?

i don't believe it refers to building insurance but i am not sure.

Just wondering as daughter just bought 3 bedroomed house 1970's house. 2 houses attached, hers and next door neighbours, cost 190k north of London, how much for rebuild?(for insurance purposes)
just to get an estimate of your house cost and rebuild cost if you can.
Will it say on valuation report from Lender?
Thanks.