Why bank valuations are so important for buyers and owners

Whether you’re buying or refinancing a property, the question of how much it is worth is of critical importance.

People often make the mistake of assuming that a property’s bank valuation will match its market value. This can sometimes lead to a rude shock when a bank valuation comes in lower.

Bank valuations vs market valuations

The market value is an estimate of what the property could fetch on the open market. It can sometimes be higher than a bank valuation, which is used to determine the loan-to-value ratio (LVR) of a specific property when using it as security for a loan. It’s important to note that bank valuers are looking at historical data (past sales), whereby an agent/market valuation is based on what might be achieved in the future.

Why bank valuations are so important

Bank valuations impact the amount of money a bank is willing to lend. If a valuation comes in low, the bank may reduce your borrowing capacity. This might make it impossible for you to buy a new home or pull out enough equity from your existing property to fund the purchase of an investment property.

You need expert help

It’s important to note that not all banks will value a property in the same way. As a broker, I can give you inside info on the different ways in which various lenders approach valuations. This may help you get deals across the line and avoid extra costs such as lender’s mortgage insurance (LMI).