skip to log on skip to main content
VoiceOver users please use the tab key when navigating expanded menus

Article | 3 minute read

Why bank valuation and purchase price can differ

When you buy a property you might assume you’ve paid market value for it. More often than not you’d be right.

But in some cases your mortgage lender may value the property at less than the purchase price. Here’s an explanation of why this occurs and what to do if it happens to you.

The bank valuation

Let’s say you’ve bought your first home and now want to finalise your loan. Before the lender offers you unconditional approval they may send an independent professional to value the property.

Lenders do this because they use your property as security for the loan. In other words, if you default on your loan, the lender has the right to sell the property to recover the outstanding loan amount.

Sometimes the valuer may estimate the market value of the property is lower than the purchase price. Let’s look more closely at some scenarios where this may happen.

Off-the-plan apartments

If you’re buying an off-the-plan apartment, it’s a good idea to remember that the lender is only able to value the finished property. Completion may be well over a year after you sign the contract and place a deposit.

There is a risk that property values in the area may change over the construction period. If they do, the bank valuation may be lower than your purchase price.

There is also a risk that the dimensions of the finished apartment may vary from the plans. This situation may result in a bank valuation that’s less than the purchase price.

Buying unregistered land

A similar situation may occur in new estates when developers offer unregistered land for sale. It may take several years for the developer to build the infrastructure necessary to register the land.

In this case, the lender will need to reassess your application before settlement. Over the time since you paid your deposit, values in the area may have changed, resulting in a valuation lower than your purchase price.

Find out more about what to consider when buying land.

What if the lender's valuation is lower than the purchase price?

As we mentioned earlier, the lender values your property to see whether it provides enough security against the loan amount. To help assess their risk, lenders use a measure called the loan-to-value ratio (LVR).

Many lenders will not lend if the LVR is more than 95%. And if the LVR is more than 80% they will ask you to pay Lenders Mortgage Insurance (LMI).

Here are some examples of what could happen if a lender’s valuation affects your LVR:

The LVR is still below 80%

  • Your purchase price is $500,000.
  • You need to borrow $300,000.
  • The lender’s valuation is $450,000.
  • LVR is 300,000 / 450,000 = 67%.

In this case the loan application would still go ahead and you wouldn’t have to pay LMI.

The LVR is still below 80%

  • Your purchase price is $600,000.
  • You need to borrow $420,000.
  • The lender’s valuation is $500,000.
  • LVR is 420,000/500,000 = 84%.

The loan may still go ahead but you will have to pay LMI. You could add the LMI cost to your loan if you have the income to service the larger loan amount.

To sum up 

  • The purchase price and the bank valuation might be different.
  • The bank valuation is used to calculate your LVR.

Extra tips and tools

Home owner tips and guides

Get practical tips to help you in your property journey, whether you're just starting out, ready to buy, or trying to sell. 

Get tips now


Free ANZ Property Profile Reportdisclaimer

Get detailed property and suburb information to help you plan and be more informed when buying, selling or refinancing.

Get a report


Connect with our home loan specialists or apply

Quick Start Home Loan Application

Get started in just 5 minutes. Apply for pre-approvaldisclaimer, a new home loan, refinance or top up your existing ANZ home loan.

Apply online now


Request a call back

Leave your details 


Connect with a mobile lender disclaimer

Find a mobile lender


Visit a branch or ANZ Home Centre

Find your nearest location


Call us

1800 100 641

Monday - Friday
8am to 8pm (AEST)


You can also chat to an ANZ accredited broker for help with your home buying, investing or refinancing needs.


You might also be interested in


Property settlement: what is it and how does it work?

5 minute read

If buying a new home were a marathon, settlement would be the finish line. But there’s a little more to it than simply handing over the cash and picking up the keys.



Pre-settlement inspections: who, what, when, why?

4 minute read

A final inspection before settlement helps you make sure any special conditions are met and the property is in the same state as when you exchanged contracts.



How to work out what a property is worth

4 minute read

It may happen that a home sells for far beyond the expected price. However, generally you'll see properties sell for around what is considered their 'fair market value'. 


The information on this page does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you and read the relevant terms and conditionsProduct Disclosure Statement and the ANZ Financial Services Guide (PDF) before acquiring any product. 

Applications for credit subject to approval. Terms and conditions available on application. Fees and charges apply. Australian credit licence number 234527.

Property price information in an ANZ Property Profile Report is an estimate (not a valuation), may not be available for all properties, is for personal domestic use only and may change daily. Actual sale prices may differ. The report is not personal advice and ANZ takes no responsibility for any error or omission.


ANZ may provide pre-approval (also known as approval in principle or conditional approval) to eligible customers who apply for an ANZ home loan and complete an application form and satisfy any other applicable requirements. Pre-approval is an approval for a loan subject to conditions being met, including that security is satisfactory to ANZ. Australian Credit Licence Number 234527.


ANZ Mobile Lenders operate as an independently operated ANZ Mortgage Solutions franchise of Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. Australian Credit Licence Number 234527.