Browse Forums Home Finance 1 Dec 07, 2012 2:41 pm I have a question regarding valuations. When the bank values your house, do they use the amount that you're spending on the house, or the amount that you're borrowing from the bank, to compare to other similar properties sold in the same area? So say you spend $400,000 on your land and house, and you borrow $350,000, and your valuation comes back at $350,000, does that still count as it being undervalued, and if so, do you have to pay another $50,000 or take out stuff for your house for that amount to decrease the cost of the house (even though you're only asking to loan the amount that the valuation came back as)? And if your valuation comes back at say $325,000, do you then have to pay the bank (or make your house cheaper by) another $25k or $75k? This is probably a really stupid question. *lol* Settlement: 10.02.13 Slab: 06.03.13 Frame: 08.03.13 Lock-up: 05.04.13 Handover: 03.06.13 Build thread: https://forum.homeone.com.au/viewtopic.php?f=31&t=59555 Brisbane Photography Re: Valuations - how does it work? 3Dec 07, 2012 3:14 pm Banks usually lend you 80% of the value. So if you paid $400K and the value is $360K they will lend you $288K instead of the $320K you want. So you will either have to come up with the extra $32K or get Lenders Mortgage Insurance to borrow the rest (as you will be borrowing more than 80% of the value) . This is where people come unstuck buying Of The Plan. If the valuation comes in lower you are sunk. Re: Valuations - how does it work? 5Dec 07, 2012 5:39 pm Hmm, not sure I feel that answered my question. To be specific, our situation is that our property is worth $390k, and we are paying a 10% deposit, so our loan will be $352k, and we have to get LMI anyway (about $6,500). So if our valuation came back at say $350k, will we have to come up with another $2,000 to bump it up to how much we're BORROWING, or $40,000 to bump it up to how much we're paying for the property? ETA: I've read through your post again and again to try to udnerstand... Are you saying that however much they undervalue you by from the TOTAL price of the property (not the borrowed amount?), they deduct from your loan? So if our $391k property was valued at $350, they would only lend us $312k instead of the $352k we wanted? Settlement: 10.02.13 Slab: 06.03.13 Frame: 08.03.13 Lock-up: 05.04.13 Handover: 03.06.13 Build thread: https://forum.homeone.com.au/viewtopic.php?f=31&t=59555 Brisbane Photography Re: Valuations - how does it work? 6Dec 07, 2012 5:51 pm The bank will always based their lending decisions and the "loan to value" ratio (LVR) on the valuation not what you are actually paying for the property. If you are paying $390k, borrowing $352k (+ $6.5k LMI) and your valuation comes back at $390k the bank will assess your LVR as 90%. If you are paying $390k, borrowing $352k (+ LMI) and your valuation comes back at $350k the bank will assess your LVR as ~100%. As far as I am aware, no bank is willing to lend 100% of the value of a property without additional security (like the existing equity in another house you own). In short, if your valuation comes back at $350k you won't get the loan. Assuming the bank will go to 95% LVR (I'm not sure if any banks will go to 95% on a construction - I know they do on established houses) the most they would lend is $332k + LMI meaning you need to find an extra $18k in cash to make the deal happen. Tender /1/12 Contract 14/6/12 Planning 12/10/12 Site 23/10/12 Piers 27/11/12 Slab 12/12/12 Frame 15/12/12 Trusses 17/1/13 Roof 24/1/13 Bricks 13/2/13 Plaster 1/3/13 Re: Valuations - how does it work? 7Dec 07, 2012 6:04 pm Ribbon ...the most they would lend is $332k + LMI meaning you need to find an extra $18k in cash to make the deal happen. So the answer to my question is in fact that you'd need to come up with enough money to match the borrowing amount, not the total amount spent on the property? Settlement: 10.02.13 Slab: 06.03.13 Frame: 08.03.13 Lock-up: 05.04.13 Handover: 03.06.13 Build thread: https://forum.homeone.com.au/viewtopic.php?f=31&t=59555 Brisbane Photography Re: Valuations - how does it work? 8Dec 07, 2012 6:18 pm I think your question is a bit confused. Does it make more sense if I explain it this way? Q1. How much will the bank lend me? A1. The agreed LVR (80% without LMI or higher with LMI) of the valuation. Q2. How much money do I need to buy this house? A2. The purchase price minus the amount of money the bank will lend you. Re the original question in your first post: Quote: When the bank values your house, do they use the amount that you're spending on the house, or the amount that you're borrowing from the bank, to compare to other similar properties sold in the same area? The answer is kind of neither, and kind of both. When the bank values your house, they estimate the value of the fully constructed house (based on your plans and contract) on your specific block of land against similar completed properties sold in the same area. After they have decided the value of the finished house, they decide whether they are willing to risk lending you the amount you are asking for based on the loan to value ratio, your credit-worthiness and their individual bank policies. Tender /1/12 Contract 14/6/12 Planning 12/10/12 Site 23/10/12 Piers 27/11/12 Slab 12/12/12 Frame 15/12/12 Trusses 17/1/13 Roof 24/1/13 Bricks 13/2/13 Plaster 1/3/13 Re: Valuations - how does it work? 9Dec 07, 2012 6:57 pm Okay, thanks. Still confused, but oh well! I guess we'll just have to trust our broker and see what happens next. Settlement: 10.02.13 Slab: 06.03.13 Frame: 08.03.13 Lock-up: 05.04.13 Handover: 03.06.13 Build thread: https://forum.homeone.com.au/viewtopic.php?f=31&t=59555 Brisbane Photography Re: Valuations - how does it work? 10Dec 08, 2012 12:39 am Ribbon is correct. The bank values the project at land value plus house construction value, and it is on their valuation that the amount you can borrow is calculated. Say you bought land for $200K and construction cost was $200K. In a perfect world, the bank would value the property at a total of $200K + $200K = $400K. However, lets say that as part of the construction costs, you decided to go for expensive 24 carat gold fixtures along with those heated floors that you so desired that in a banks view does not value add, so much so that they don't count them as full value and value the construction cost as $150K. The bank valuation would then come back at $200K (land) + $150K = $350K. According to bank policy if the maximum they will lend you is 90% of their valuation, in the above case this would come to $350K @ 90% = $315K. Now you are paying $400K for everything, but the bank will only lend you an amount of $315K, meaning you will have to find the difference ($85K) to proceed with the purchase, regardless of how much deposit you initially had and were looking at borrowing. Cheers Tom Re: Valuations - how does it work? 11Dec 10, 2012 10:11 am We're going through the same thing at the moment. If they will lend you 90% (10% deposit), they will only lend you 90% of the valuation price. Therefore if they valued your house at $350 000. They will only lend you 90% of that price which is $315 000. If you are actually paying $390 000 on that house and land, you will need to have $75 000 to add to the money that the bank will loan you, so you can meet the total cost of the house and land. You will need to also check if they will allow a higher LVR with the lenders Mortgage insurance. My build thread: viewtopic.php?f=31&t=65324&p=1032514#p1032514 Re: Valuations - how does it work? 12Mar 26, 2013 12:21 pm Hi guys.. a complete newb when it comes to this land and house thing.. wife and i wanted to build to finally get into the market.. FHB and were looking at land out S/W Sydney for about $270,000 and to build around $270-300,000. so at most $540,000 for the total purchase price.. the house price includes a few upgrades.. ie, electrical, carpet/tilesm kitchen and finishings.. we'll have over 5% but the time we look to intiate this.. the general feelings im getting from this thread is that the bank won't lend according to the tender we submit, but by their own evaluation, which may not consider the additions.. is that right? Re: Valuations - how does it work? 13Mar 26, 2013 12:32 pm That's right ssjmark. The valuer will value the completed house at a price THEY think would sell for in the CURRENT market against similar properties in the area. What YOU think the house should be valued at is irrelevant. Deemaree Kyndylan Capers: viewtopic.php?f=36&t=46852 My blog: http://www.sufficientlysufficient.blogspot.com/ Re: Valuations - how does it work? 14Mar 26, 2013 1:08 pm Deemaree That's right ssjmark. The valuer will value the completed house at a price THEY think would sell for in the CURRENT market against similar properties in the area. What YOU think the house should be valued at is irrelevant. how do people plan for their homes then if they have no real idea of what the bank will lend them? are you safe if building in a highly saught after development and high quality house? Re: Valuations - how does it work? 15Mar 26, 2013 6:03 pm Have you had a preapproval for your loan? You can check real estate in the area yourself and remember to compare apples with apples (so to speak) to get a rough idea. Deemaree Kyndylan Capers: viewtopic.php?f=36&t=46852 My blog: http://www.sufficientlysufficient.blogspot.com/ Re: Valuations - how does it work? 17Mar 26, 2013 8:50 pm Real estate sites will give you an idea-try domain.com.au or realestate.com.au Deemaree Kyndylan Capers: viewtopic.php?f=36&t=46852 My blog: http://www.sufficientlysufficient.blogspot.com/ Re: Valuations - how does it work? 18Mar 27, 2013 11:39 am looking to put our deposit on land next month.. the lot wont be registered until June 2014.. a broker i spoke to said to not put anything down.. until i get pre-approval.. i didnt think i needed it since its over a year till registration.. Re: Valuations - how does it work? 19Mar 27, 2013 11:55 am You need to know what the banks will lend you. If you put a deposit on anything make sure the contract states "subject to finance". Deemaree Kyndylan Capers: viewtopic.php?f=36&t=46852 My blog: http://www.sufficientlysufficient.blogspot.com/ Re: Valuations - how does it work? 20Mar 27, 2013 12:31 pm we've seen the broker and they did our borrowing power.. came back with more than enough.. however, not sure if pre approval would pass because we dont have the 5% as of this exact moment.. but will have it by the time the 5% deposit is due.. what do you mean by "subject to finance"? no many terms to learn.. thanks for the help Block of two storey townhouses requires painting on the roof. A brick parapet wall separates each unit and extends above the tiled roof. The parapet walls require sealing… 0 3443 I posted the floorplan on Houzz.com forum and got some really good ideas and advice from people there. Then we reached out to a couple of renovation companies and one… 5 10018 1) I had requested R6 ceiling insualtion batts, however I noticed that on some areas there are huge gaps which will allow hot air to sweep in, and also noticed black/grey… 0 3476 |