When you’re buying a home or refinancing your loan, a frequent part of the loan process is obtaining a bank valuation. A valuation of your property allows your lender to use your property as security against the money you want to borrow.
Bank valuations work to protect both yourself and the lender. It Is designed to give enough information for the lender to decide whether the property is safe to lend on, and up to what amount. It is also the price a bank thinks it could get for your house if you defaulted on your loan and had to sell your property to recover losses (in times of severe financial hardship).
A common question we get asked is whether a bank valuation is the same as a real estate agent’s appraisal. It is not. On the other hand, the ‘Market value’ is an estimate of the price you might get if you or a real estate agent sold the house yourself, without any time limitations and or expenses spared with marketing.
So what are bank valuations used for?
When you want to buy a new property, refinance or access the equity in your home, as your mortgage broker we have to make sure that you aren’t borrowing more than the value of the property itself.
The valuation is based on the surveyor’s knowledge of comparable prices in the locality. It may also give a “replacement value” which is the amount of money it would take to rebuild the property from scratch, should it ever be necessary. Later on, the mortgage lender will ask to see evidence that a suitable buildings insurance policy is in place, together with confirmation that you are covered for the minimum replacement value.
Sometimes, a valuer may need to get access inside the property and at other times, they can do a valuation from the street. Generally, the value is decided by looking at the home for details such as:
general location and council zoning
overall size and number of rooms
vehicle access to the property
building structure and condition