A valuation is the lender’s own assessment of a property’s value, used to calculate your effective LVR and confirm the security is adequate, and it doesn’t have to match your purchase price or your own estimate. If it comes in lower, that can genuinely change your LVR, your LMI position, or the loan amount on offer.
How a valuation is actually done
Valuations are typically ordered by the lender, not chosen by you, and can be a physical inspection, a desktop assessment using comparable sales data, or an automated valuation model, depending on the property, loan size and lender’s own policy. The method used can genuinely affect the outcome, and you generally don’t get to choose it.
What happens if it comes in low
A valuation below your purchase price is one of the more common causes of a loan needing to be restructured late in the process, it effectively raises your LVR against the lender’s own figure, which can trigger LMI where it wasn’t otherwise expected, or require a larger cash contribution to bridge the gap. If this happens, ask whether a second valuation is possible and what it would cost before assuming the first figure is final.
When valuation matters most
- Off-the-plan purchases, where the valuation happens near settlement, sometimes years after the contract price was agreed
- Construction, where an “as-if-complete” valuation estimates the finished property’s value
- Unusual property types, small apartments, rural land, company title, where comparable sales data can be thinner
What to prepare
- A cash buffer in case the valuation comes in below the contract price
- Awareness of any lender valuation fee
- A plan for what you’d do if a second valuation is needed
Next step: see Valuation in the Loan Feature Explorer, and keep your Funds Position current in case a lower valuation changes your required cash.