| By :
Eva Judge
When applying for a mortgage, the bank or lending institution that you're working with is going to look at more than just your ability to pay. In order to protect themselves, the bank needs to perform a valuation of the property that you're purchasing. It is one important - and unavoidable - step in the home buying process. The Purpose Of Home Valuations - The valuation that is performed by the bank or lending institution that your Brisbane mortgage broker connects you with is not to be confused with the property inspections that you'll have done as a part of the conveyancing process. Instead, the valuation that your bank will complete will be done to ensure that, should you default on your loan, the bank will be able to sell it for the appropriate amount of money. Essentially, this valuation is performed to protect the interests of the bank or lending institution that you are working with for your mortgage. What Is Looked At During A Valuation? Bank valuations are less concerned about pests and structural disrepair, and more concerned with simply determining how much a property will sell for on the current market. The bank will typically hire an independent valuator or a valuation company to perform the valuation. The state of the property in question, along with how much similar properties in the area have been selling for, will be brought into consideration. Once performed, the valuation is considered valid for approximately three months. What Things Don't Come Into Play During A Valuation? Just as there are many characteristics that come into play during a valuation, there are many things that are not considered at all. For example, lending institutions do not consider any valuations that you have performed. The valuation must be conducted by a bank-approved entity. Similarly, real estate estimations and council rates notices are not considered valid means of valuating property when it comes to securing financing. The simple fact is that there is nothing that you can do to impact the outcome of a bank valuation as they are entirely in the bank's hands. How A Valuation Can Affect You - Your Loan To Value Ratio, or LVR, will be affected by the outcome of the bank's valuation. This will then determine whether or not you will pay Lenders Mortgage Insurance, or LMI. If your LVR exceeds 80%, you will most likely need to pay LMI. Either the valuation amount or the purchase price of the property - whichever is lower - will be used to determine your LVR. In essence, whilst the valuations are mostly performed for the banks and lending institutions, they will ultimately have an additional impact on the amount of money that you will be required to pay for your new home.
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