Effect of low bank valuation on finance approval

[billie40]

Hi all,
Just wondering if a bank valuation comes in low (say 20k under purchase price) and they are only lending 80% will they only lend 80% of the valuation estimate? Is it as clear cut as this?
And if this were the case, will finance simply fall through or will they dictate that you can still use other funds (if there are any available after purchase costs and deposit)?

 

[Rolf Latham]

Hi all,
Just wondering if a bank valuation comes in low (say 20k under purchase price) and they are only lending 80% will they only lend 80% of the valuation estimate? Is it as clear cut as this?
And if this were the case, will finance simply fall through or will they dictate that you can still use other funds (if there are any available after purchase costs and deposit)?

depends who "they" is

if the bank val is low, its usually a good get out if hats what u want.

Sometimes its a good tool to chase a lower price too though
ta
rolf

 

[billie40]

Thanks Rolf. 'They' are Macquarie. Hasn't come in yet, but am concerned we offered too much. Do you need to be formally refused finance to get out on finance clause though? I assumed if they know you have the money to fund the rest (borrowed for reno work) they might say finance is not refused, but not sure how it works.
I guess they have to formally refuse for you to get out or negotiate down as you say..

 

[Rolf Latham]

mac will lend x on val y


if thats within your finance clause then finance is deemed fit'


In general, if u need the deal to fail under finance, your broker can make same........

ta
rolf

 

[billie40]

Ok, thanks for the info

 

[Shahin_Afarin]

Generally speaking the valuation should come back at the same price as the contract of sale.

There are times that this does not but at an 80% LVR there are a few lenders that will take COS price.

If you are really concerned and don't want to go with a lender that does a COS price then you can always request your broker to order desktop/kerbside valuations via other lenders.

The point is you have plenty of back up plans so I can't see you being unable to purchase this property at 80% based on a valuation.

 

[Jamie M]

Just wondering if a bank valuation comes in low (say 20k under purchase price) and they are only lending 80% will they only lend 80% of the valuation estimate? Is it as clear cut as this?

Hey Billie

Banks will generally lend against whichever is the lowest - the valuation or the purchase price.

An exception to this is for off the plan where the contract was signed greater than 6 months ago.

Cheers

Jamie

 

[billie40]

Thank you everyone for your advice, much appreciated