When applying for a home loan in Frankston, property valuation plays a crucial role in determining your loan amount and overall financial situation. As experienced Home Finance & Mortgage Brokers, Abundance Home Loans understands how property valuations can significantly impact your home loan journey.
What Is Property Valuation in Home Loans?
Property valuation is a professional assessment of your property's market value, conducted by a qualified valuer. This process forms the foundation for calculating your loan to value ratio (LVR), which directly influences your borrowing capacity and whether you'll need to pay lenders mortgage insurance (LMI).
Lenders require property valuations to:
• Determine the loan amount they're willing to approve
• Calculate your LVR percentage
• Assess their risk when lending to you
• Confirm the property's worth in the current property market
How Property Valuation Affects Your Home Loan Application
The valuation outcome can impact several aspects of your Home Loan application:
Loan Amount Approval
If your property values below the purchase price, lenders may reduce your approved loan amount. This could require you to increase your deposit or reconsider your buying a home strategy.
Lenders Mortgage Insurance Requirements
With an LVR above 80%, most lenders require LMI. A lower property valuation increases your LVR, potentially triggering this additional cost even when you hadn't initially expected it.
Interest Rate Impact
Your LVR can influence the interest rate offered by lenders. Higher LVR loans may not qualify for certain interest rate discounts that lenders reserve for borrowers with lower risk profiles.
The Valuation Process During Your Application
Once you submit your Home Loan application with supporting documents including bank statements, your chosen lender arranges the property valuation. This streamlined application process typically involves:
- Lender engages an independent valuer
- Valuer inspects the property
- Market analysis and comparable sales research
- Valuation report submitted to lender
- Lender reviews and proceeds with loan assessment
Understanding LVR and Its Connection to Property Values
Your loan to value ratio directly correlates with the property valuation outcome. For example, if you're purchasing a $600,000 property in Frankston with a $480,000 loan amount, your LVR would be 80%. However, if the property values at $580,000, your LVR jumps to approximately 83%, potentially requiring LMI.
Impact on Different Home Loan Options
Property valuations affect various Home Loan options differently:
Fixed Interest Rate Home Loan
While your fixed interest rate home loan rate remains stable, the initial rate offered may depend on your LVR following valuation.
Variable Home Loan Rates
Variable interest rate products often have different pricing tiers based on LVR bands, making valuation outcomes particularly relevant.
Home Equity Considerations
For existing homeowners, property valuations determine available home equity for refinancing or accessing additional funds through an offset account or redraw facility.
Preparing for Property Valuation Challenges
To minimise valuation-related complications:
• Research recent comparable sales in your target Frankston area
• Consider getting pre-approved for your Home Loan to understand potential scenarios
• Maintain flexibility in your deposit amount
• Discuss Home Loan pre-approval options with experienced mortgage brokers
When Valuations Don't Meet Expectations
If your property valuation falls short, several options remain available:
Increase Your Deposit
Adding funds to reduce your loan amount can bring your LVR back to acceptable levels.
Negotiate Purchase Price
Use the valuation as evidence to renegotiate with the vendor.
Explore Alternative Lenders
Different lenders may accept varying LVR levels or have different valuation approaches.
Consider Lenders Mortgage Insurance
While an additional cost, LMI allows you to proceed with higher LVR loans.
The Role of Professional Mortgage Brokers
Working with experienced Home Finance & Mortgage Brokers provides access to Home Loan options from banks and lenders across Australia. Professional brokers understand how different lenders approach property valuations and can guide you toward lenders whose valuation processes align with your circumstances.
Brokers can also assist with calculating home loan repayments under various scenarios, helping you understand how different home loan interest rate options might affect your situation if valuations impact your LVR.
Moving Forward with Confidence
Property valuations form an integral part of your home loan journey in Frankston. Understanding their impact on your borrowing capacity, interest rate options, and overall financial position helps you make informed decisions throughout the application process.
Whether you're exploring variable interest rate or fixed rate options, the valuation outcome influences your available Home Loan Rates and terms. Professional guidance ensures you're prepared for various scenarios and have access to suitable lenders for your situation.
Call one of our team or book an appointment at a time that works for you to discuss how property valuations might affect your home loan application and explore the most suitable options for your circumstances.
