When applying for a home loan, property valuation plays a critical role in determining your loan amount, interest rate, and overall borrowing capacity. For dental professionals seeking to achieve home ownership or invest in property, understanding how lenders assess property values can make a substantial difference to your financial stability and home loan application success.
What Is Property Valuation in Home Lending?
Property valuation is the process lenders use to determine the current market value of a property you wish to purchase or refinance. This assessment directly impacts several key aspects of your home loan:
- The loan amount you can borrow
- Your loan to value ratio (LVR)
- Whether you'll need to pay Lenders Mortgage Insurance (LMI)
- The interest rate and rate discount you may receive
- Your overall borrowing capacity
Lenders typically engage professional valuers to conduct this assessment, ensuring an objective evaluation of the property's worth. The valuation report provides crucial information that helps lenders manage risk and determine suitable home loan products for your circumstances.
How Property Valuation Affects Your Loan to Value Ratio
The loan to value ratio (LVR) represents the percentage of the property's value you're borrowing. For instance, if a property is valued at $800,000 and you have a $160,000 deposit, you would need to borrow $640,000, resulting in an 80% LVR.
Your LVR significantly influences:
- Interest rate discounts: Lower LVRs often qualify for better variable interest rate or fixed interest rate offerings
- LMI requirements: Borrowing above 80% LVR typically requires Lenders Mortgage Insurance
- Access to home loan features: Some home loan packages with premium features may only be available at certain LVR thresholds
- Home loan rates comparison: Different lenders offer varying current home loan rates based on LVR bands
Dental professionals often have access to LMI Waivers for Dentists, which can allow borrowing up to 90% LVR without paying LMI, potentially saving thousands of dollars.
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Book a chat with a Finance & Mortgage Brokers at Home Loans for Dentists today.
Understanding Valuation Discrepancies
Occasionally, a lender's valuation may differ from the purchase price or your expectations. This situation can affect your home loan application in several ways:
Lower Than Expected Valuations: If the valuation comes in below the purchase price, you may need to increase your deposit to maintain your desired LVR or negotiate with the seller on pricing.
Higher Than Expected Valuations: While less common, a higher valuation can improve your LVR position and potentially qualify you for lower rates or additional home loan benefits.
For dentists who are self employed, understanding these dynamics becomes particularly important when calculating home loan repayments and assessing which home loan options align with your financial situation.
Valuation Impact on Different Home Loan Products
Property valuation influences your access to various home loan products and home loan features:
Owner Occupied Home Loan: Valuations for owner occupied properties often receive more favourable treatment than investment properties, potentially affecting your home loan interest rate and available home loan packages.
Investment Properties: When you invest in property, lenders typically apply more conservative valuations and may offer different variable home loan rates or fixed interest rate home loan options.
Construction and Renovations: If you're considering construction loans or renovating your house, valuations may be conducted on an 'as if complete' basis, which requires specialist assessment.
Choosing Between Variable Rate, Fixed Rate, and Split Rate Options
Once your property valuation is complete and your LVR established, you'll need to select from various interest rate structures:
- Variable rate: Fluctuates with market conditions, offering flexibility and potential access to features like an offset account or linked offset facility
- Fixed rate: Provides certainty with a fixed interest rate for a set period, protecting against interest rate increases
- Split loan: Combines both variable interest rate and fixed interest rate portions, balancing security and flexibility
Each structure offers distinct home loan benefits depending on your circumstances and financial goals.
Principal and Interest Versus Interest Only
Your property valuation and LVR also influence your repayment structure options:
Principal and Interest: Regular repayments reduce the loan amount over time, helping you build equity and improve borrowing capacity for future property purchases.
Interest Only: Available through interest only loans, this option can help those who need lower repayments initially or are focusing on investment property strategies.
Maximising Valuation Outcomes
To secure the most favourable property valuation:
- Provide the valuer with relevant comparable sales data from the local area
- Ensure the property is presented well during inspection
- Highlight any recent renovations or improvements
- Consider timing if the market is strengthening
- Obtain home loan pre-approval to understand your position before making offers
For dental professionals purchasing their first home loan or buying your next home, understanding these factors helps you make informed decisions about the properties you consider and the offers you make.
Valuation and Additional Home Loan Features
A favourable valuation can unlock access to valuable home loan features that enhance your financial position:
- Offset account: A mortgage offset facility can reduce interest charges by offsetting your savings against your loan amount
- Portable loan: Ability to transfer your home loan to a new property without refinancing costs
- Redraw facilities: Access to additional repayments you've made
- Flexible repayment options: Ability to make extra repayments without penalties
These features can contribute significantly to building equity in your property over time.
Working With Specialist Mortgage Brokers
Dental professionals benefit from working with brokers who understand both property valuation nuances and the specific advantages available to healthcare professionals. Access to home loan options from banks and lenders across Australia means you can compare rates effectively and identify which lenders offer the most favourable valuation practices for your situation.
Whether you're looking at home loans for general dentists, orthodontists, or other dental specialties, specialist knowledge ensures you secure your future with appropriate loan structures and favourable terms.
Understanding how property valuation impacts your home loan application empowers you to make informed decisions about property purchase prices, deposit requirements, and loan structures. This knowledge is fundamental to achieving successful property ownership outcomes and long-term financial stability.
Call one of our team or book an appointment at a time that works for you to discuss how property valuation affects your specific home loan situation and explore the home loan packages available to dental professionals.
