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.





1 user(s) are reading this topic

0 members, 1 guests, 0 anonymous users

 

Toddler attacked at gym creche

Two-year-old girl Eva Ness was left with a black eye and bite marks on her face and body after an altercation with an older child at a health club's child-minding facilities. Now her parents are calling for the centre to be closed.

WIN a $100 RedBalloon for Dad

Enter now for your chance to win 1 of 5 $100 RedBalloon experience vouchers. Helping you make Dad's Day EXTRA HAPPY.

Carseats have twice as many germs as a toilet

Most parents know their child's carseat is not always squeaky clean, but they might not realise just how dirty it really is.

Doctors remove foetus from 'medical marvel' after 36 years

Doctors in India have removed the skeleton of a foetus that had been inside a woman for 36 years.

Nine months in six seconds: new parents' Vine clip a hit

We?ve seen some memorable time-lapse pregnancy and birth announcement videos before. Now one new couple has taken it to the extreme, capturing it all in just a six-second Vine video.

Sonia Kruger speaks of baby joy

Celebrity mum-to-be Sonia Kruger has spoken candidly about using donor eggs and IVF to fall pregnant at age 48.

Dressing to not impress: life through the eyes of a three-year-old

When it comes to getting dressed, my three-year-old has only one criterion: ?I don?t want to look beautiful.? And now I've worked out why.

Special nappies made with love for angel babies

Angel Baby Nappies make and provide tiny bereavement cloth nappies for pre-term stillborn babies and premature babies who pass away in the NICU.

Inside the brain of a tantruming toddler

What's going on in your child's mind in the lead-up to a tantrum? And what?s the best way to respond?

5 secrets to a long-lasting relationship

When it comes to keeping your relationship strong, it?s what you do - and not what you want - that really matters.

When 'furbabies' meet real babies

I am obsessed with my dogs, and can't imagine loving them any less once my baby arrives. But that doesn't stop everyone from telling me I will.

The least popular baby names of 2013

Looking for a baby name that?s nowhere near the top 10 ? or even the top 1000? Try the bottom five.

'I was so sleep deprived I crashed my car'

There are no laws regulating driving while tired, but statistics show that driver fatigue is one of the top three contributors to the road toll.

Why are there so few sexy maternity bras?

Rather than feeling ashamed of their post-baby bodies, women should be free to buy lingerie that makes them look attractive and pretty - no matter what stage of life they're in.

Toddler Alliyah one step closer to first trip home

She has lived the first 14 months of her life in a hospital intensive care unit, but Alliyah Broadby's parents hope to finally take their little girl home with them.

'Put people before IVF profits': IVF pioneer Alan Trounson

IVF could be done for hundreds of dollars in Australia instead of $8500 if clinics stopped charging what ''the market will handle'', a pioneer of the technology says.

Expectant parents urged to swap the pub for bub

Nearly one in five women drink while pregnant, but a current campaign is trying to drive down that unhealthy statistic.

Nutella supplies threatened by bad weather

There's bad news for fans of Nutella, the gooey, chocolatey hazelnut spread.

The cost of growing your own vegies

Does it make financial sense to grow your own veggies, or are you better off ordering produce from the local food co-op?

Breastfeeding mums less likely to suffer from PND, but all need support

A new study has shown the a complex relationship between a mother?s intention to breastfeed, her ability to do so, and postnatal depression.

The #loveyourlines Instagram account taking on body issues

A new Instagram account, LoveYourLines, has put the call out for to change the way we view stretch marks.

Mum gets diploma 51 years after being thrown out of school over pregnancy

Sandra Lantz was about six months pregnant and four months from graduation when she was forced to leave high school. Now, more than half a century later, she has finally graduated.

The lowdown on male midwives

How would you feel about having a male midwife assist your baby's birth? For a growing number of mums, the idea is a reality - and the experts all agree that it's something that should be encouraged.

Bomb threat at daycare centre

Worried parents took to social media yesterday after their children's daycare was evacuated due to a bomb threat.

Unusual celebrity baby names

Celebrities love to use their imaginations when it comes to naming their kids! Here's a gallery of some of the most memorable monikers in show biz families.

5 fears I've overcome since becoming a mum

Motherhood has a way of putting any phobias you had pre-parenthood into perspective: you either realise they?re a pointless waste of energy or they simply vanish in a sleep-deprived haze.

Win back some precious time and get FREE coupons

Membership to eBay's Bubs? Corner is free and includes a $10 coupon to spend on nappies each month - a win for multitasking mums!

Download now: Essential Kids Activity Finder app

Got bored kids? Quickly find the best activities for kids wherever you are in Australia with the Essential Kids app.

 
Advertisement
 
Advertisement
 
 
 

What's hot on EB

Win back some precious time and get FREE coupons

Membership to eBay's Bubs? Corner is free and includes a $10 coupon to spend on nappies each month - a win for multitasking mums!

Do you suffer from Precious Firstborn Syndrome?

Testing ?no more tears? shampoo in your own eyes, warming cucumber sticks so they're not cold straight from the fridge, waking a sleeping baby to check they?re still breathing: these are all symptoms of Precious Firstborn Syndrome.

Ezra's tragic death not in vain, mum says

Little Ezra was a "Harry Houdini" who loved trying to escape the family home. Now, after his tragic death, his parents are doing what they can to help others.

7 mistakes old hands make with new babies

As I sat across the table from my friend ? me, a seasoned mother of three; her, a brand new mum ? I thought of all the mistakes an old-hand parent can make when visiting a newborn baby.

Video: When adults act like children

Ever wondered what would happen if adults were allowed to act like children? This dad's hilarious video clip will give you an idea of what life would be like.

Mums hit hardest as flu cases skyrocket

The number of confirmed cases of influenza in Australia has doubled the number for the same time last year - and women are 25 per cent more likely to get it.

The mum who had four babies in nine months

Feeling exhausted due to the demands of caring for a baby? Imagine the life of this mum, who gave birth to three boys and one girl in just nine months.

Everything baby at Big W

Lowest prices on everything baby, only at Big W. Sale starts August 4 and ends August 20 2014.

Smiggle is painting the town red!

We have 3 Red Smiggle prize packs to give away! Enter by posting a photo of something red to your Instagram.

Going viral

Mum gives birth at school

After four decades in the industry, pest controller John Birkett couldn't believe what he found in one woman's bedroom.

Personalised baby gifts

We've scoured the internet to find gorgeous personalised keepsakes and nursery decor to record baby name and dates. They make great gifts for christenings, name days and birthdays! (All prices in AU.)

 

Mind, body, beauty, life

Making time for me

We look at your wellbeing, covering health, relationships, beauty and fashion, mind and body.

 
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.