When was the last time you had your property valued? We’re not talking about a real estate appraisal or an online estimate, but a mortgagee (bank or lender) instructed valuation.
A bank’s valuation of a property not only determines how much credit they’re willing to extend for your purchase or refinance, but it can also influence your interest rate. So, why should this process stop once the loan has settled?
Market Valuation vs Bank Valuation
Understanding the differences between bank valuation and market value is essential when buying, selling, or refinancing a property. Market value represents the property’s worth in an open market, influenced by various external factors and emotional considerations. In contrast, bank valuation typically is a more conservative estimate used by lenders to mitigate risk and ensure they can recover their loan in case of default.
Are All Bank Valuations the Same?
Not all bank valuations are the same. For example, there are different types of residential valuation reports. All adopting the comparison method, two are completed online via the lender’s Automated Valuation System (AVS) or by a licensed valuer completing the report without sighting the subject property (Desktop Valuation).
Both methods aim to provide a quick and reasonably accurate estimate of the property value, though they may be less precise than a full physical appraisal.
Valuations can also be conducted from the street (kerbside), where the property is assessed from the exterior. For a more thorough inspection, access inside the property may be required, resulting in either a short-form or long-form report. The short-form report provides a concise summary, while the long-form report offers a detailed analysis and comprehensive assessment of the property’s condition and value.
What is LVR Price Tiering?
Lenders price their products based on the loan amount against the value of the property used as security (Loan to Value Ratio, or LVR). Typically, the lower the LVR, the lower the interest rate.
The team at Distinctive Finance has access to over fifty lenders, each requiring their own instructed valuation report. If you are dealing with only one lender, the value placed on the property is the critical number. An unfavourable outcome could negatively impact your application for credit and result in a higher interest rate.
The Importance of Regular Reviews
Property valuations fluctuate constantly, and an outdated valuation could mean you’re paying more interest than necessary. At Distinctive Finance, we regularly review our clients’ loans and, if a valuation is over six months old, we commission an updated report, generally at no cost to you. This proactive approach can save you thousands, ensuring more money stays in your pocket instead of the bank’s.
When was the last time you had your property actually valued?
Contact the team at Distinctive Finance today to discover how we can help you save on your interest rate.
Leighton Packer – Distinctive Finance & Qualified Valuer
leighton@distinctivefinance.com.au
0457 030 533
