kong71286Participant@kong71286Join Date: 2009Post Count: 261
G'day fellow investors,
Recently registered for a 7 day trial of http://www.realestateinvestar.com.au/ and stumbled upon a 3 bedroom, 1 bathroom, 1 garage property in Mildura that is on the market for $95,000 and APM estimates its value to be between $141,000 with a confidence score of 3.
When a bank states they will loan 80% LVR, does this refer to the purchase price or the market value of the property? i.e. would they provide 100% financing for this property which is 67% below estimated market value, or only 80% of the purchase price?TerrywParticipant@terrywJoin Date: 2001Post Count: 16,190
It would be the lower of the market value or contract price. If you buy if for $95k that is likely the value that it will come in atRick staParticipant@rick-staJoin Date: 2011Post Count: 119
Exactly, if you secure the property for 95k then that is seen to be the market value, because that's what the market is willing to pay.Nigel KibelParticipant@nigel-kibelJoin Date: 2005Post Count: 1,425
My understanding is it is the contract price or valuation whichever is the lower. In Australia even if the valuation comes in higher than the contract price they will only lend against the lower amount. Unlike New Zealand where the bank will lend on valuationTheFinanceShopParticipant@thefinanceshopJoin Date: 2012Post Count: 1,271
It's the lower of the valuation or COS however in most cases the valuation comes back the same of the COS price so that is what the bank takes as the security value. There is scope to go back even as early as 3-6 months after the purchase and have the property re-valued however you will need to have a strong case as to why the property has since increased in value.
ShahinTerrywParticipant@terrywJoin Date: 2001Post Count: 16,190
It is very rare for a val to come in over purchase price. I had one once with a unit. Similar unit next door sold for about 20% more. The bank was able to give a 95% LVR loan based on pp, but not LMI because they are able to base this on valuation.Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,018
Definitely based upon purchase price or valuation whichever is the lower.
In the old Challenger days they used to actually lend on valuation rather than the lower of the two but those days have been and gone.
Commercial lending can be different with a little more flexibiliity.
Buy the property and borrow based on the 95K and then get your Broker to arrange a new valuation in 3 months time (without lodging a formal application) with supporting sales evidence and get the lender to allow a loan increase.
Repeat and go again on the next property.
Yours in FinanceJeanoParticipant@jeanoJoin Date: 2011Post Count: 24
You can always get it valued by another valuer
CheersJamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
If it was a favorable purchase (which this isn't) then we can get lenders to take the value.
99% of the time, the valuer will simply value it at purchase price and that's what the lender will go off.
Jamiekong71286Participant@kong71286Join Date: 2009Post Count: 261
Thanks for all your input and for clarifying the finance queryRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,018
Hate to say getting a second valuation wont do you any good as the loan is still based on the lower of the two figures.
Got one here in Brisbane where the valuation came in at $40K over the purchase price (Very unusual) however we can initially only lend against the purchase price. Nice for future equity release though.
Depending on the numbers and you own particulars with an initial 10% you could possibly borrow circa $105,000 against the property and then piggy back the funds onto the next deal without having to wait for the equity release.
Yours in FinanceFreckleBlocked@freckleJoin Date: 2012Post Count: 1,681