Buying a home is a major accomplishment.
It takes years of saving for a down deposit.
And a tremendous amount of paperwork.
Even finding the right property is its own challenge.
But few aspects are as important as the loan application process. Unless you have the cash on hand, you need to secure a mortgage. This starts by getting your finances in order and arranging a consultation with a lender or broker.
It may seem like another expense, but property valuations are necessary for the loan application process. It also benefits the buyer as you can better assess the current value of the property. If you are buying your first home, it helps to understand what this actually entails.
What is a property valuation?
Every lender has certain criteria that must be met before a loan can be approved. What these actually are varies for each lender.
But every lending institution will request a valuation on the property. After all you are essentially using their money and they are taking a risk in doing so. Lenders use valuations to assess the value of the property and to work out the amount they can lend you responsibly.
Factors that affect property valuations include:
- Physical location
- Building structure
- Planning restrictions
- Actual condition
- Overall size
- Vehicle access
- Council zoning
Valuers will need to visit the property to note the condition of the property and other details including any structural faults. Reports also include photos to highlight certain features. Comparative sales in the area are used to determine the valuation figure.
Lenders use valuations to ensure the loan is not worth more than the value of the property.
How much does a property valuation cost?
Like most things, the actual cost for a valuation varies so it is important to do your research first.
However, valuations typically tend to range from $300 to $600 in capital cities. The level of detail required also affects how much you pay.
Some valuations can be performed with information readily available online so it is less labour intensive. Others may conduct a comprehensive analysis of the property before giving a valuation. Your lender will be able to provide more details on what it is needed if you have any further questions.
When is a property valuation needed?
Valuations are typically requested when lenders are financing a certain property.
When taking out a mortgage, lenders use the home as security. So in the event you are unable to make repayments on the loan, the bank needs to be sure it can sell the property to pay back the loan. The bank will need to do so quickly to avoid interest accumulating over a longer period.
Other times valuations are needed is if you are selling a property or refinancing a loan.
Is there a way to increase the valuation of the property?
If you sell in the future then you will want a higher valuation to maximise your investment.
Most factors are well beyond your control such as location and the overall size. But there are immediate steps you can take to increase the value of your property. Which can help to get your asking price and more.
- Present your property well: Impressions matter. So take the time to tidy your property from the inside out. Organise all your things or even consider renting out a storage to clear up some space. You can also hire a professional cleaner.
- Invest in renovations: Renovations can add a great deal of value to your property. Start with main areas such as the kitchen and living room. New flooring and cabinetry along with other upgrades can also further increase value.
If you are not yet ready for a valuation, you can look at median property prices in your area to better estimate the value of your property.
Still have additional questions?
FHOC is a leading home builder in Perth. Our specialists are here to assist and deliver complete transparency in helping with all aspects of buying your first home. Contact us today to schedule a consultation with our building consultants.
First Home Owners Centre Contact Information
24/7 Sales Enquiry Line: (08) 6144 1088