Jump to content

Mortgages and bank valuations


  • Please log in to reply
13 replies to this topic

#1 Phascogale

Posted 12 February 2013 - 10:08 AM

This is hypothetical.

You want to buy a house that you are willing to pay $500K for but the bank only values it at $450K.  You only require $150K from the bank.  Will the bank still give you the mortgage you want?  Or will they say it's overpriced and say no?  Their interest is covered because of the small mortgage if you need to sell.

Just curious.

#2 Bluenomi

Posted 12 February 2013 - 10:14 AM

Generally banks will only lend you what they value the house at minus the deposit they require. So if they value a house at $450k but require a 10% deposit, they will only lend you $405k. Generally it is a bad idea to pay more for a house than the bank values it at.

#3 BetteBoop

Posted 12 February 2013 - 10:19 AM

Yes, you'll still get a loan.

They're only concerned with what happens to their money if you default on your loan.

Provided they can sell the house and recoup the money they've loaned you (plus all costs associated with doing this) then they're okay.

#4 Peppery

Posted 12 February 2013 - 10:20 AM

Yes, if you happen to default they would still be able to recover the money you owe.

#5 Coffeegirl

Posted 12 February 2013 - 10:33 AM

QUOTE (Bluenomi @ 12/02/2013, 11:14 AM) <{POST_SNAPBACK}>
Generally banks will only lend you what they value the house at minus the deposit they require. So if they value a house at $450k but require a 10% deposit, they will only lend you $405k. Generally it is a bad idea to pay more for a house than the bank values it at.


I don't think this is the case any longer.  Banks are being very conservative in their valuations and the valuations can vary widely between lenders.

When we looked at re-financing last year, we had one bank value our property $150,000 less than our current bank, yet the independent valuer valued it at $100,000 over our current bank's valuation.  so a variance of $250,000....  

Yet based on current sales in our area, the independent valuer is closer.



#6 Phascogale

Posted 12 February 2013 - 10:55 AM

I wouldn't want to pay anymore for a house than what it was worth (and would hopefully pay less and get good value).  Personally I would always look at a house as an investment and regardless of how much I loved it, I wouldn't spend more than I thought it was worth.  

I had heard that banks were reluctant to give you a mortgage (even with a healthy deposit) if they feel that you are overpaying for the house.  Hence my question.

It was more of whether a bank would be a safety net to help prevent you paying too much for a property.



#7 Illiterati

Posted 12 February 2013 - 11:14 AM

Why don't you use the banks valuation to try and negotiate a better price with the seller? If you walk away from the sale, the next potential buyer will also have to get a bank valuation that may also lead them to walk away.

#8 Mpjp is feral

Posted 12 February 2013 - 11:23 AM

We recently bought a house that we had offered a higher price for than the bank valuation came in at. The bank was lower than the independant valuation we had recieved. The bank told us they were conservative - especially in certian areas. This property was classfied as rural so teh valuations are lowered on that basis alone.

We used that to negotiate the price down. The vendor agreed to split the difference with us.

The bank loaned us the money...they didnt care about the valuation - only that their money was covered (so obviously our money made up the difference).

#9 SeaPrincess

Posted 12 February 2013 - 11:45 AM

QUOTE (Coffeegirl @ 12/02/2013, 08:33 AM) <{POST_SNAPBACK}>
I don't think this is the case any longer.  Banks are being very conservative in their valuations and the valuations can vary widely between lenders.

In our experience, this is true - bank valuations have invariably been lower than real estate valuations because the bank is only concerned with protecting their interest if you default.  Their valuation reflects what they expect to get with a quick sale, not maximising their return.

#10 Kemismum

Posted 12 February 2013 - 11:55 AM

As long as the amount you want to borrow is within the loan to value ratio (LVR) they require based on their valuation, you will still get the loan.

So say the bank requires a LVR of 80% minimum, they will lend you up to $360,000 on a property valued by them at $450,000. It doesnt matter how much you actually pay for the house, as long as you can show you can pay the difference and service the loan.

Banks are being very conservative on valuations at the moment, but yes I would use that as a bargaining tool to reduce the price if possible.

#11 Bridandzar

Posted 12 February 2013 - 08:48 PM

Personally I don't really trust bank valuations.  We have changed banks in the last month and when our house was valued I was talking to the valuer and we were discussing prices etc in the area, we then got to how much we needed the house value to come in at and surprise surprise it came out at that figure.  Then the bank told us we needed to insure the house for about $70 grand more than the valuation.............

#12 B.feral3

Posted 12 February 2013 - 09:05 PM

QUOTE (Phascogale @ 12/02/2013, 10:55 AM) <{POST_SNAPBACK}>
I wouldn't want to pay anymore for a house than what it was worth (and would hopefully pay less and get good value).


What a house is valued at by a bank valuation and what it's actually worth to a buyer are very different.

My area is old and very mixed. All the houses are around 80-120 years old. There are million dollar masterpieces next door to $150,000 dollar 'renovators delights' and a whole lot in the middle all within streets of here. We had an evaluation done on our house recently as we want to remortgage and sell (complicated). Anyway, we'll be listing for about 80k more than the valuation came back at.

The bank valuer simply compares one x bedroom, x bathroom home to others the same in the area but does not take into consideration renovations etc. It doesn't matter to a bank valuer that mine has a new 25K kitchen, a beautifully renovated bathroom and flawless polished flaws whilst the other x bedroom, x bathroom has same kitchen and bathroom it did from the early 70's with the original carpet, stained and worn.

Like I said, what a bank valuer values a house at and what it's worth are not always on par. It's a guide for the bank only and not a buyer or even a seller necessarily.

Edited by Bek+3, 12 February 2013 - 09:08 PM.


#13 lynneyours

Posted 12 February 2013 - 09:14 PM

QUOTE (Bridandzar @ 12/02/2013, 09:48 PM) <{POST_SNAPBACK}>
Personally I don't really trust bank valuations.  We have changed banks in the last month and when our house was valued I was talking to the valuer and we were discussing prices etc in the area, we then got to how much we needed the house value to come in at and surprise surprise it came out at that figure.  Then the bank told us we needed to insure the house for about $70 grand more than the valuation.............


Insure it for what?  Total loss?  The extra money would be to demolish and remove the old destroyed house and get the site to a state where your house could be reinstated perhaps?

#14 Bridandzar

Posted 19 February 2013 - 10:36 PM

QUOTE
Insure it for what? Total loss? The extra money would be to demolish and remove the old destroyed house and get the site to a state where your house could be reinstated perhaps?


No we had taken into account and insured for the clean up of the site and removal of all debris.  Even the insurance company was very stumped and couldn't understand why the bank had wanted more insurance on the house.  For the sake of an extra $40ish for the year I just got it.





0 user(s) are reading this topic

0 members, 0 guests, 0 anonymous users

 

'I will defend my son's right to wear a tutu'

Three-year-old boy Roo likes to wear tutus and, until now, it hasn't been a problem.

Chinese sign up toddlers for chief executive classes

CHILDREN as young as three are being enrolled in "chief executive courses" in China as pushy parents become obsessed with giving their offspring an advantage over their young peers.

Free ticket offer

Pinky Mckay joins us again at the Essential Baby & Toddler Show presented by Blackmores with her expert baby settling advice. Register now for your free ticket.

The 'best little baby' and the police officer who rescued him

"And just in my head, I'm a father myself, and I couldn't sit there and let him ... I couldn't let him sit in that."

Olympian sells medal to pay for child's cancer treatment

An Olympian has sold his medal to help fund cancer treatment for a 3-year-old boy.

Family of mum who took her own life speak out about PND

From the outside it looked like Allison Goldstein was blissfully happy. She had a new baby, a loving husband, and was part of a close knit-family.

For the festival lover in all of us

Pre-book & Save 50%. Get your tickets now for Kidtopia Festival. 7-9 October 2016 Parramatta Park, Sydney.

BuggyCart solves the dilemma of shopping with a pram

Ducking to the shops for some groceries is a whole other ballgame once you have a baby.

Viral photo shows powerful moment before second baby's arrival

While our second baby was very much wanted, I wondered if I could love another baby as much as I loved my first.

What does a baby with whooping cough sound like? Sometimes like this

It's a heartbreaking video that's difficult to watch, but that's just what Sydney mum of two Sandra wants people to do.

Cheers! Why we're all happy to be bad mothers now

A new generation of mums is resisting the pressure to be "perfect" - and revelling in their naughty side?

Dealing with mealtime fussiness: mums share their tips

It can be frustrating, worrying, and turn into a battle of wills - but it doesn't have to be like that

Why having a puppy is like parenting a child

Despite being a dog owner and a parent, I've never been able to relate to the idea that the two have many similarities – until now.

Baby Joey is sleeping star in adorable photos

When photographer mum Laura Izumikawa puts her baby daughter down to sleep, the last thing on her mind is rest.

The necessity of 'Do not disturb' signs for napping babies

Needless to say, the last thing any mum wants is for someone to loudly knock on the door and wake their sleeping cherub.

Mum's brutal truth about c-section: 'This is not the easy way out'

A new mum has shared photos of her caesarean section scar to prove she did not "take the easy way out" when giving birth to her son.

Twins give birth in same hospital just hours apart

Leanne went into labour on July 28, and remarkably, her twin sister Natalie soon followed.

Goki Ride-On cars for toddlers

Toddlers just love to ride on anything with wheels but will often reject the pram once they can walk.

Letting your health slide as you look after the kids? Here's how to get out of the trap

It's time to start prioritising our own health, as well as the health of our children, to avoid longer lasting health challenges.

How to child-proof every room in your house

A guide to making your home a safer place for little ones.

Portable pool safety reminder after toddler's death

The drowning of a Hobart toddler has prompted a coroner to remind the community that even inflatable and portable pools must be fenced.

I have a clingy toddler - help!

"Nothing stops the clinginess - he cries when I put him down, no matter how long I hold him."

Woman sues after botched termination leads to motherhood

A 23-year-old mother is suing her GP and the public health system for thousands of dollars to support her son after her termination went wrong.

 
Advertisement
 

Top 5 Articles

Advertisement
 
 
 

What's hot on EB

For the festival lover in all of us

Pre-book & Save 50%. Get your tickets now for Kidtopia Festival. 7-9 October 2016 Parramatta Park, Sydney.

Ex-Perth model stuck with 12kg leg after limb doubles in size during pregnancy

"I often have strangers coming over to me when I'm out asking bluntly what's wrong with my leg. I often just laugh now and tell them I've been attacked by a shark and walk off, it definitely stumps people."

Same sex couple 'blessed' with triplets via surrogacy

They feared they would never get to be parents, but a same sex couple is now adjusting to life with newborn triplets.

Should children be given antibiotics in their first year?

Here are the the pros and cons of giving antibiotics to young babies.

Baby born on mum AND dad's birthday

The birth of a baby is always a special occasion, but one couple who welcomed their first child earlier this week had more reason to celebrate than most.

The joys (and benefits) of show and tell

Show and tell has been around for donkey's years. Well, at least since I was a kid, and according to my own children, I'm pretty old.

Loyal dog dies saving baby's life during fire

A baby was rescued from a house fire after her family's loyal dog used his body to shield the little girl from the flames.

How having a young baby or toddler changes your home decor

What to expect when living with an older baby or toddler - and how to manage the chaos.

I'm trying to keep my child-free friends in my life, but it's tough

I tried to prove to my single friends that I was the same I'd always been. But marriage did change me - and motherhood has, too

'There's a giant picture of BOOBS but I can not feed my child'

A mum was ushered out of an US department store's underwear section after discreetly breastfeeding her baby.

How baby Evelie was saved after being born without a heartbeat

Bethanie Millar didn't believe in miracles - until baby Evelie was born, that is.

How an Aldi staff member made one exhausted mum's day

It was a simple act of kindness, but one that made an exhausted mother's day.

OvuSense: the new internal monitor helping predict ovulation

When a couple is trying to conceive it is easy for a woman to become obsessed about when she ovulates.

Mum-to-be surprises husband with big news in joy-filled photoshoot

When Bri Dow learnt that she was expecting, she immediately knew she wanted to break the news to her husband Brandon in a special way.

How a homemade wheelchair is giving baby Evelyn freedom

Like all one-year-olds, Evelyn Moore is keen to get moving and explore the world around her. But a battle with aggressive cancer left the little girl paralysed from the waist down.

Adorable: App captures special moments of pregnancy and motherhood

There's something about motherhood that turns even the most reluctant photographer into a keen shutterbug as they strive to capture all the best moments of life with a baby.

Dad shares horror tale after Roomba's run-in with dog poop

It's the poop story that's been shared hundreds of thousands of times around the world.

 

SYDNEY SHOW - 23-25 Sept

Essential Baby & Toddler Show - Sydney

The Essential Baby & Toddler Show, presented by Blackmores, will be held in Sydney on 23-25 September. Register for your free ticket now to save $20!

 
Advertisement
 
 
Essential Baby and Essential Kids is the place to find parenting information and parenting support relating to conception, pregnancy, birth, babies, toddlers, kids, maternity, family budgeting, family travel, nutrition and wellbeing, family entertainment, kids entertainment, tips for the family home, child-friendly recipes and parenting. Try our pregnancy due date calculator to determine your due date, or our ovulation calculator to predict ovulation and your fertile period. Our pregnancy week by week guide shows your baby's stages of development. Access our very active mum's discussion groups in the Essential Baby forums or the Essential Kids forums to talk to mums about conception, pregnancy, birth, babies, toddlers, kids and parenting lifestyle. Essential Baby also offers a baby names database of more than 22,000 baby names, popular baby names, boys' names, girls' names and baby names advice in our baby names forum. Essential Kids features a range of free printable worksheets for kids from preschool years through to primary school years. For the latest baby clothes, maternity clothes, maternity accessories, toddler products, kids toys and kids clothing, breastfeeding and other parenting resources, check out Essential Baby and Essential Kids.