What is a lender's valuation?
A lender's valuation is an independent assessment of a property's value ordered by a bank or mortgage lender to determine the security available against a loan, which may differ from the purchase price or market value.
When you apply for a mortgage in Perth, your lender orders a valuation to confirm how much the property is actually worth as security for the loan. This is not the same as the price you agreed to pay or what a real estate agent might list it for. The lender needs an objective assessment to decide how much they are willing to lend.
Lenders typically use three types of valuation depending on loan size and risk. A desktop valuation relies on comparable sales data and property records without a physical inspection. A kerbside valuation involves a valuer driving past and observing the property from the street. A full valuation includes an interior and exterior inspection, measurements, and a detailed report on condition and market comparables.
The lender's valuation can be lower than your purchase price if the property is in poor condition, the market has shifted, or comparable sales suggest overpricing. It can also be higher than the contract price, though lenders then lend on the lower amount anyway. This gap matters because it affects your loan-to-value ratio and whether you need to pay additional deposit or lender's mortgage insurance.
If you believe the valuation is incorrect, you can request a review or a second opinion. A mortgage broker can help you understand the valuation report and discuss options with the lender.