Borrowing - Bank Valuation

Discussion in 'Loans & Mortgage Brokers' started by Kkkmani, 3rd Feb, 2021.

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  1. Kkkmani

    Kkkmani New Member

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    11th Dec, 2020
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    Sydney
    Hi All,

    What valuation does that Bank use to lend against. Recently purchased a property and i think i purchased it at lower price than the recent nearby comparable sales.

    My Broker advises that the Bank will use the lower of either the purchase price or the Bank Valuation, even if the Bank Valuation comes out higher than purchase price. Is this true, or can i borrow against the higher valuation (if it were to be valued higher)

    Appreciate any help
     
  2. Lindsay_W

    Lindsay_W Well-Known Member

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    Yes, for purchases the lender will use the lower of the valuation or contract price.
     
    Last edited: 3rd Feb, 2021
    Terry_w likes this.
  3. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    In 17 years I've probably reviewed over 1000 purchase valuations. Only 3 come to mind that were higher than the actual purchase price.

    One was off the plan that took 4 years to settle in a rising market back in 2006.

    I'm convinced the other two were typos.

    I'm fairly confident that your valuation will reflect the purchase price.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    About 15 years ago I had a client who was borrowing 95% of a property purchase. It was a unit is a residential block and the valuer valued it about 20% over the contract price. I rang him to confirm and he said a very similar unit just settled across the hallway from my clients at this higher price and because they were basically the exact same size and outlook he had no choice but to value at this amount.

    The client ended up borrowing 95% without LMI because the loan amount was less than 80% of the valuation. The bank was Bankwest. Unlikely to happen today I think.
     
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    You're broker is right.

    There might be some lenders that will go off a higher price if the property is off the plan (new) - I know ANZ used to back in the day but that might have changed.....however, it's super rare for a property value to come back higher than purchase price though.

    Cheers

    Jamie
     
  6. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    If its a purchase of an existing property, generally the val wouldnt come back higher then what the contract of sale notes, but eitherway they wouldnt use the higher amount.

    OTP is different, they willl generally use the higher valuation if contract is signed 12 months prior.
     
    Last edited: 4th Feb, 2021
  7. Redom

    Redom Mortgage Broker Business Plus Member

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    You will need to wait a while before a different valuation can be used. Typically they retrigger back down given the market value has been reset by you. In moving markets, you can reval and release equity a few months after purchasing. Most of the time its a little longer than that though.