When applying for a mortgage, one critical step you might hear about is the bank valuation. But what exactly is it, and why does it matter?
1. What is a bank valuation?
- A bank valuation is an independent assessment of the property’s current market value. Lenders use it to make sure the home is worth the amount being financed.
- There are different types of valuations—some are done electronically using data, while others require a physical visit to the property.
2. Why is the valuation important when buying?
- Determines your loan amount: The lender will usually only finance based off the property valuation, not necessarily the purchase price. If the valuation is lower than expected, you may need to cover the difference.
3. Why does it matter when refinancing?
- Sets your new loan value: The bank valuation helps determine how much you can borrow against your home’s current value.
- May impact refinancing options: If your home has decreased in value, refinancing might be limited or require additional steps like mortgage insurance.
- Potential to lower your rate: If your property value has increased, refinancing could give you access to better loan terms.
Understanding how bank valuations work can help you avoid surprises and better navigate your home purchase or refinance.
If you have any questions or want to discuss how this applies to your situation, click CONTACT US to book an appointment.