The lender bases its loan-to-value calculation on the value it accepts, not necessarily the contract price or the owner’s estimate. If a purchase price is $800,000 but the lender values the property at $750,000, a percentage-based loan will usually be calculated from the lower accepted value. That can create a cash gap.
- Lenders use their accepted valuation
- Low valuations can create purchase shortfalls
- Unconditional contracts carry more risk
- Refinance cash-out depends directly on valuation
- A second lender may not always solve the issue
Why valuations differ
Valuers rely on comparable sales, property condition, location, land and building characteristics and current market evidence. Automated, desktop and full valuations can also produce different confidence levels.
A high contract price is not automatically evidence that the bank should lend against the same value.
Options on a purchase
Depending on contract status, the buyer may contribute more cash, reduce the loan amount, seek another acceptable lender/valuation, negotiate with the vendor where possible or withdraw if finance protections permit.
Auction and unconditional contracts carry greater risk because the buyer may not have a finance escape clause.
Options on refinance or equity release
A low valuation can reduce cash-out or keep the LVR above a lender’s pricing threshold. Sometimes another lender has stronger valuation evidence, but the overall product and policy still need to fit.
Do not choose a lender solely because one valuation is higher if the loan structure is otherwise poor.
Frequently asked questions
Can I challenge a valuation?
Sometimes, if there is strong comparable evidence or factual errors. The valuer is not required to match the contract price.
Can another bank value it higher?
Yes, valuation outcomes can differ, but there is no guarantee.
What if the valuation is higher than purchase price?
For a normal purchase, lenders generally still use policy rules based on the transaction and accepted value; a high valuation does not automatically create instant cash equity at settlement.