Do lenders use their valuation or the purchase price to determine the LVR?

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Rosie M
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Joined: Wed May 22, 2019 2:58 pm

Do lenders use their valuation or the purchase price to determine the LVR?

Postby Rosie M » Wed May 22, 2019 3:01 pm

Hi, fourteen months ago I signed a contract and put up a 10% deposit on a 2 bedroom apartment being developed by a reputable developer. The contract price is $603,000, however, I’m estimating the market price of the property to be in the $680,000+ range. The unit is due to settle in late July or early August of this year. I’m trying to ascertain whether the lender will use their valuation or the purchase price to determine the Loan to Value Ratio?

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Otto Dargan
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Re: Do lenders use their valuation or the purchase price to determine the LVR?

Postby Otto Dargan » Wed May 22, 2019 4:00 pm

Hello Rosie M. Welcome to the forums.

Typically, if the purchase price is different from the valuation then the lender and their mortgage insurer will use the lower of the two to determine the Loan to Value Ratio (LVR). You can also use our LVR calculator to play around with the figures.

This is pretty common in off the plan purchases, where the value of the unit may have gone up or down since the date the contract was signed. We have some lenders who calculate the LVR using their valuation instead of the purchase price. However, they will do this only if the contract of sale was signed more than 3 months prior to the date you apply for a loan, and they also require the contract to be over 12 months old.
We can order a free upfront valuation with several of our lenders to help you maximise your borrowing power.

Speak to one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our free assessment form to maximise your borrowing power for an off the plan mortgage.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Rosie M
Posts: 3
Joined: Wed May 22, 2019 2:58 pm

Re: Do lenders use their valuation or the purchase price to determine the LVR?

Postby Rosie M » Wed May 22, 2019 5:11 pm

I was hoping they would use the higher figure so I can bring my LVR down to 80% so as to avoid the mortgage insurance altogether. I’m getting my documents and finances in order in preparation for the settlement date. When is a good time to apply for a mortgage?

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Otto Dargan
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Re: Do lenders use their valuation or the purchase price to determine the LVR?

Postby Otto Dargan » Wed May 22, 2019 6:13 pm

Hi Rosie M,

The best time to apply for a mortgage is when the settlement date is less than 3 months away. When the building is almost complete, you can apply for a formal approval with most lenders. Some lenders want the construction complete and a certificate of occupancy provided prior to settlement.

We can provide you with an informal assessment so you have a good idea if you will qualify for an off the plan home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Rosie M
Posts: 3
Joined: Wed May 22, 2019 2:58 pm

Re: Do lenders use their valuation or the purchase price to determine the LVR?

Postby Rosie M » Wed May 22, 2019 6:29 pm

Let’s say, the valuation came at $600,000, and I’ve been approved for a $540,000 mortgage. What will be my fortnightly repayment?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
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Re: Do lenders use their valuation or the purchase price to determine the LVR?

Postby Otto Dargan » Wed May 22, 2019 6:52 pm

Hi Rosie M,

You can use our Loan Repayment Calculator to work out your home loan repayments with different loan sizes, interest rates, loan terms and repayment options.
With a $540,000 loan assuming a 30-year loan term at an interest rate of 3.59% p.a. with a principal and interest repayment, your fortnightly repayment will be $1,226.

You can use the Bank Standard Variable Rate (BSVR) less a 0.7% discount. This is only a rough guide, in some cases, we may be able to get you a better interest rate.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for an off the plan home loan with the most competitive interest rates and suitable terms.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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