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

 

Why we tend to hold our babies on our left side

On which side of your body do you carry or cradle your baby? If you answered "left" then you're not alone.

Taking fish oil in pregnancy may prevent childhood asthma

Women who took omega-3 fatty acid supplements (fish oil supplements) in pregnancy reduced the risk of their children developing asthma by almost one third.

Mum, dad and son all share a birthday

Luke and Hillary Gardner never have a problem remembering each other's birthday.

Mum shares the bittersweet truth about pregnancy after miscarriage

A mother's candid and heartfelt reflections about pregnancy after miscarriage are providing comfort to other women.

16 simple ways to make your baby smarter

What's the best way to mentally stimulate your baby? It doesn't take a genius - just a loving, involved parent.

Your blood pressure could predict baby's sex even before conception

The average blood pressure of mother could suggest a baby's sex before it even exists, a study has found.

The breastfeeding photo that says it all

Ashley Rockill was lucky enough to have her birth photographer on hand to capture a precious moment.

13 pregnancy superstitions from across the globe

In honour of Black Friday, let's explore 13 of the strangest pregnancy superstitions from across the globe.

I'm a stay-at-home mum, and I'm sending my son to daycare

When you become a mum you give birth to a beautiful baby, but you also give birth to guilt.

Mum gives birth to 'Incredible Hulk' 6.4kg baby

An American mother was shocked when she gave to a 6.4kg (14lb 1oz) baby last month.

Mum demands $530 for daughter's shoes after playdate

A mum has made a pretty bold move by demanding $532 for a pair of her daughter's shoes that were damaged at another family's house. 

A toddler's guide to helping around the house

If a toddler was to write a guide to 'help' you with the household chores, it would go something like this.

The breast pump you can use on the go

The game-changing breast pump promises to make life easier all round.

'Mum, don't be mad but I've just had a baby'

A teen mum has shared her birth story – and her shock at not knowing she was pregnant until her baby's head emerged.

No, Senator, childcare workers don't just wipe noses and stop fights

The only thing childcare workers spend their time doing is "wiping noses and stopping the kids from killing each other"? Not quite.

'I wanted to be the birth mum so much'

When people say "aren't you lucky that there are two of you, that you can switch?" I give them a tight smile.

6 myths about breastfeeding toddlers

Although breastfeeding a toddler isn't for everybody, if you choose to nurse beyond babyhood you can expect some strong reactions.

 
Advertisement
 

Top 5 Articles

Advertisement
 
 
 

From our network

Your child's fine motor skills: what you should know

There is less of a focus on fine motor skills, but they're just as important as others. (SPONSORED)

5 ways music helps your toddler's development

There are at least five other compelling reasons to get musical around your toddler. (SPONSORED)

 

Baby Names

Unusual Celeb Baby Names

Click through the gallery to read the details and see some of the most memorable monikers in show biz families.

 
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.