Bank val higher than purchase price

[Henry]

Hi all,

I was just wondering, is it common for the banks valuation of the property to be higher than the purchase price & if this be the case, does it imply you have a bargain?

How conservative are the banks with their vals?

Also, Lenders Mortgage Insurance....... does anyone know whether the insurer works on purchase price or bank val when calculating the LMI ammount ?

Thanks,

Henry

 

[MarkB]

Originally posted by Henry
I was just wondering, is it common for the banks valuation of the property to be higher than the purchase price & if this be the case, does it imply you have a bargain?

Also, Lenders Mortgage Insurance....... does anyone know whether the insurer works on purchase price or bank val when calculating the LMI ammount ?

Henry

I don't know how common it is, but I believe that some banks have a policy of only disclosing valuations where discrepancies of greater than 10% arise (between bank val and purchase price).

Re: your 2nd question.

I recall posing a similiar question once and the reply I got was that they will use the lower of purchase price / bank valuation for LMI (thus maximising your LVR).

MB

 

[Rolf Schaefer]

Henry,
the LMI premium is calculated against the actual loan amount.

 

[Mariaact]

Hi Henry,

In my experience it is very uncommon for a Banks valuation to be higher than purchase price unless there are exceptional circumstances - so if you do get that result you are more than likely getting a bargain.

Most Valuers are conservative (but fairly realistic), after all they have to back up their estimates with actual sales, as opposed to estimates of capital growth and regardless of any Real Estate agents promises of unlimited potential.

Both the Bank and the Mortgage Insurer work on the lower of the valuation / purchase price under normal circumstances, although if a valuation comes in higher than the purchase price and there are mitigating circumstances SOMETIMES they will look at the reverse, but dont count on it. They still expect your 5%
(or whatever is applicable) deposit to be calculated on the purchase price.

Hope this helps,

Maria

 

[Mariaact]

Also,

the LMI premium is calculated on the loan amount, but depending on the Bank & Mortgage Insurer it can be on a sliding scale depending on the actual LVR - so the higher the LVR the higher the LMI multiplication factor x the loan amount.

Maria

 

[Henry]

yo

Hi all,

Thanks fof your replies!

we seem to have some conflicting answers tho.

Rolf says the LMI is calculated on the loan ammount & others the lower of purchase price/bank val.

Going by what my lender has said, I'm sure one or the other is the correct answer & it isn't going to make any difference now which one it is.

What happened was the bank val came in higher than purchase price & the loan person thought this would reduce the LMI ammount & thefore require a new loan offer to be signed. But now he tells me he thinks LMI will remain the same. This would be consistent with what you lovely people are saying.

Thanks again
Henry

 

[Henry]

Whoops!

I stuffed that up.

Posted a new thread instead of reply

Edited - now fixed - no charge (Les)

 

[Mariaact]

Henry,

Because the val came in higher, your actual LVR would have gone down and that would mean that even though your loan amount remained the same the LMI premium is calculated on a lower ratio giving you a lower actual premium - however it is at the Banks/mortgage insurers discretion and as they are in the business to make money it is rare they will actually decrease a premium if they can get away without having to. Unfortunately most policy states they only have to work on the lower of the two figures ( valuation/pruchase privce), I have rarely seen them do anything else even if it seems to defy logic.

In any case it sounds like you got a bargain so I guess that is something!

Maria

 

[Rolf Latham]

Hiya All

Good Luck with the lower premium on val vs contract :O)

I have just pursued this to the nth degree with a big four lender and we will eventually win, the difference being some 4 k in this instance.

If your contract is 6 to 12 montsh old MOST lenders will take val over contract for obvious reasons, but some will not without being pushed.

ta

rol

 

[bundy1964]

Originally posted by Henry
How conservative are the banks with their vals?

Hi Henry

Debank in my case ( commercial property ) does a valuation on an empty building worst case situation meaning about a 10% discount on leased value. So far I have had valuations equal or exced the sale price

bundy

 

[XBenX]

Have I misread that ? What your saying Bundy would mean the banks arent being very conservative at all - or your purchase price is below market value?

 

[bundy1964]

Originally posted by XBenX
Have I misread that ? What your saying Bundy would mean the banks arent being very conservative at all - or your purchase price is below market value?

It may mean I have driven a hard bargin

Within the last year buyers have moved from the unwritten ADL rules of buying at 7% yeild for new properties, 8 to 10% for well located older ones and 12 to 14% for ones in a pig of a location to buying old properties on 5 to 6% yeilds and paying too much based on inflated short term lease backs by retiring business owners. Either the valuers have become more generous or people are putting plenty of hurt money in.

If valuers are now generous my property values may of nearly doubled in the last year It is still posiable to find some at what I would call a fair market value with some smaller agents who you have to hunt out.

bundy