Bank Valuation - Value of House and land or Just Loan?

Que es claps.. · Jun 11, 2020 9:19 pm

Hi all,

I purchased a block of land in February 2020 which is due to title in August 2020, and was wondering when the bank goes to value it and the home I build on it, will the valuation need to cover only the monies that they are providing, or will it need to cover entire cost of the home including that of my deposit?

E.g., Land is worth $350K, house $200K, but I have a $100K deposit, thus only requiring funding of $450K; does the valuation need to be reflective of the entire house and land price $550K, or just up to the funding/the $450K portion that the bank will be covering?

Cheers!

KameGame · Jun 12, 2020 4:01 pm

Valuation is on done on the value of the land+house i.e the bank will check if the value of house+land is $550K and if it can lend 80% or 90% as you requested. In your example if the valuation comes to 500K, the bank will only lend 80%/90% of the valuation price.

TTLE · Sep 10, 2020 1:25 am

Hi there

I clarified that today with my broker
So if you don't buy the land and build straight away
When you purchase the land, the valuation is just for the land alone

Once you are ready to build and take out a construction loan, the bank/lender would do a valuation of the house/land as if it is completed (compare to other similar houses on the similar size block of land in the area). The total value is what you borrow against however they will deduct the land deposit you initially put down whether its 10% or 20%

We bought out land and due to settle in a month an a half, the valuation comes back at the contracted price. We are not building right now, not for another 6-7 months at least, so when the time comes, if the valuation comes back in our favour, then we might not need the deposit for the construction because we have the existing equity. We will still continue to save though, will try not to bank it all on the land valuation.
Hope that helps