When applying for a home loan, one of the key steps in the process is the home valuation.
A home valuation determines the value of the property you intend to buy or refinance, and it plays a significant role in how much you can borrow, the type of loan you can get, and the overall success of your loan application.
At Bluestone Home Loans, we want to ensure that you’re well-informed about all of the stages of securing a loan — including the home valuation process. In this guide, we’ll explain why valuations are needed, how the process works, and what costs are associated with getting a property valued.
Why Do Lenders Require a Home Valuation?
A home valuation is required by lenders to assess the property’s market value. This is important because it helps lenders determine your Loan-to-Value Ratio (LVR), which compares the amount you want to borrow to the value of the property.
The LVR is a key factor in the decision-making process and can impact the interest rates, loan terms, and overall loan approval.
For example, if you’re buying a property for $500,000 and the lender values it at $480,000, the difference between the purchase price and the valuation may reduce your borrowing capacity or require you to contribute a higher deposit.
How Does the Home Valuation Process Work?
The home valuation process is relatively straightforward, but it’s important to understand each step involved:
| Request for Valuation | Once you’ve chosen a property and are ready to apply for a home loan, your lender will request a professional valuation of the property. Depending on the lender, they may arrange this themselves or ask you to coordinate with an independent valuer. |
| Valuation Appointment | A licensed property valuer will visit the property to assess its condition and value. They will take into account factors such as:
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| Valuation Report | After the inspection, the valuer will provide a written report detailing their assessment of the property’s value. This report will be sent to your lender, who will use it to calculate your LVR and determine your loan eligibility. |
| Lender Decision | Once the valuation is complete, the lender will review the report and make a decision based on the property’s value. If the property is valued lower than the purchase price or lower than your expectations, it could impact the amount you can borrow or potentially lead to the loan being declined. Conversely, if the property is valued higher than expected, you might have more flexibility in your loan amount or be able to avoid lenders mortgage insurance (LMI). |
How Long Will My House Valuation Take?
Typically, a home valuation can take anywhere from a few days to a couple of weeks, depending on the valuer’s schedule and the complexity of the property. It’s a good idea to check with your lender for specific timelines.
The Costs Associated with Home Valuations
Home valuations are rarely free to the borrower, so it’s essential to talk to your mortgage broker to understand all the fees and charges associated with a new home loan, how they’re paid and when. This will help you avoid any nasty surprises.
The cost of a home valuation can vary depending on the type of property, the location, and the lender. In Australia, the average price of a home valuation can be anywhere between $300 and $600.
Here are some common scenarios where you may incur valuation fees:
| Purchase Valuation | If you’re buying a home, the lender will generally require a valuation of the property to determine its market value. This is standard practice in Australia, and the cost is typically passed on to the borrower. |
| Refinance Valuation | If you’re refinancing your existing mortgage, your lender may require a valuation to reassess the property’s value. In some cases, lenders will offer a free valuation as part of a refinancing deal, but this isn’t guaranteed. |
| Property Investment | For investment properties, lenders may request a valuation to assess the property’s potential as collateral. This is especially important if you’re seeking to borrow more than you initially did when the property was purchased. |
Extra Costs for Specific Valuations
If you have a non-standard property, such as a rural property, a unique architectural design, or one with unusual features, the valuation cost may be higher due to the additional time and expertise required.
Disputed Valuations
If you disagree with the valuation provided by the lender’s valuer, you may be able to request a second opinion or challenge the valuation. However, this can result in additional fees, so it’s important to weigh the costs and benefits before proceeding.
When Can or Should I Get a Valuation?
You can get a home valuation at various stages beyond just selling. It’s beneficial when considering refinancing your mortgage, assessing your property for insurance, or managing estate planning and deceased estate matters. Additionally, obtaining a valuation before selling can help you understand your home’s market position and make necessary improvements.
Regular valuations for investment properties can track performance, while significant market changes such as property prices in your area or interest rates may warrant an update. You can request a valuation at any time, even without selling, to gain insights into your property’s current worth.
Real Estate Appraisal vs. Valuation – what’s the difference?
It’s important to note that a real estate appraisal and a home valuation aren’t the same. An appraisal provides a rough market value estimate typically used as a guide for sellers, similar to what many online real estate tools provide. In contrast, a valuation is a more comprehensive, typically unbiased report that is legally binding.
How to Increase Your Home Loan Valuation
If you’re looking to boost your home’s valuation, consider making improvements that enhance its appeal and functionality. Simple upgrades like fresh paint, landscaping, or minor renovations can make a significant difference.
Additionally, maintaining your property and ensuring it’s clean and clutter-free during the valuation can positively impact the outcome.
Keep in mind that while making improvements may boost your home’s value, it’s crucial to strike a balance between the cost of the upgrades and the expected increase in value.
A Quick Overview of Home Valuations
Home valuations are an essential part of the loan application process and help lenders determine their borrowing capacity.
The valuation process involves a physical inspection of the property you want to purchase, followed by a report detailing the property’s market value. Valuation costs can change, so ensure you confirm this with your broker.
While the valuation itself may be an additional expense, it is a necessary step in ensuring that your home loan application is approved and that you’re borrowing within your means.
If you don’t already have a broker, then contact us today to connect with a trusted mortgage broker who can help you navigate your upcoming home valuation.
