When applying for a home loan in Essendon, understanding property valuation is crucial to securing the loan amount you need. Property valuation directly impacts your borrowing capacity, loan to value ratio (LVR), and whether you'll need to pay lenders mortgage insurance (LMI). At Margin Finance, we help clients understand this essential part of the application process.
What is property valuation in home loans?
Property valuation is an independent assessment of a property's market value conducted by a qualified valuer. When you apply for a home loan, lenders require this valuation to determine how much they're willing to lend against the property. The valuation protects both you and the lender by ensuring the loan amount reflects the property's actual worth.
The valuation amount directly affects your loan to value ratio (LVR), which is calculated by dividing your loan amount by the property value. This ratio determines your interest rate, whether you need LMI, and the overall terms of your home loan.
How property valuation affects your borrowing capacity
Your borrowing capacity depends on several factors, including your financial situation, income shown in bank statements, and the property's valuation. When buying a home in Essendon, lenders typically offer loans up to 80% of the property's valued amount without requiring LMI.
If the valuation comes in lower than expected, it can impact your Home Loan application in several ways:
• Reduced loan amount available
• Higher deposit requirements
• Need for lenders mortgage insurance if LVR exceeds 80%
• Potential changes to your interest rate
A MARGIN EXCEEDING THE MEANS OF OTHERS
The valuation process during your home loan application
Once you submit your Home Loan application, the lender arranges for an independent valuer to assess the property. This typically occurs after initial loan approval but before final settlement. The streamlined application process we offer at Margin Finance ensures all documentation is ready when the valuation takes place.
The valuer considers various factors when assessing Essendon properties:
- Recent sales of comparable properties in the area
- Property condition and features
- Location and proximity to amenities
- Current property market conditions
- Any unique characteristics that affect value
Managing valuation risks and LVR considerations
To minimise valuation risks when applying for a home loan, consider these strategies:
Research the property market: Understanding recent sales in Essendon helps set realistic expectations about property values and loan amounts you can access.
Consider your deposit: A larger deposit reduces your LVR, which can help if the valuation comes in lower than the purchase price. This also helps you access Home Loan options with more favourable terms.
Get pre-approved: Home Loan pre-approval gives you confidence about your borrowing capacity before making an offer, though the final loan amount still depends on the property valuation.
Impact on interest rates and loan features
Property valuation affects the Home Loan Rates and features available to you. A lower LVR typically means access to:
• Interest rate discounts from lenders
• Choice between fixed interest rate home loan and variable home loan rates
• Additional features like offset account options
• Access to Home Loan options from banks and lenders across Australia
When calculating home loan repayments, both the loan amount (influenced by valuation) and home loan interest rate determine your ongoing costs. Whether you choose a variable interest rate or fixed interest rate, the valuation plays a role in determining which rates are available to you.
Using home equity and property valuations
For existing homeowners in Essendon, property valuations are also important when accessing home equity for investment or refinancing purposes. Regular valuations help you understand how much equity you've built up, which can be used for future property purchases or home improvements.
Stamp duty considerations also factor into the overall cost of buying a home, separate from the loan amount determined by valuation. Understanding these additional costs helps with overall financial planning.
Working with mortgage brokers for valuation guidance
At Margin Finance, we guide Essendon clients through the entire home loan process, including understanding how property valuations affect their applications. Our experience with various lenders means we can help you access Home Loan options that work within your specific valuation and financial circumstances.
We assist with preparing your Home Loan application, ensuring your financial situation is presented clearly, and helping you understand the implications of different LVR scenarios. Our knowledge of the local property market helps set appropriate expectations about valuations in the Essendon area.
Property valuation is just one part of the home loan process, but understanding its impact on your borrowing capacity, interest rates, and loan features helps you make informed decisions about buying a home. With proper preparation and professional guidance, you can approach the valuation process with confidence.
Call one of our team or book an appointment at a time that works for you to discuss how property valuation affects your home loan options in Essendon.
