Bricklayers Guide to Property Valuation & Home Loans

What is Property Valuation and Why Does It Matter?

When you're ready to achieve home ownership or invest in property, one of the most critical steps in your home loan application is the property valuation. As a bricklayer, you've probably valued plenty of structures in your career, but understanding how banks value property can make the difference between getting approved for your home loan and facing disappointment.

Property valuation is the process where a qualified valuer assesses what a property is worth in the current market. This figure directly affects your loan amount, your loan to value ratio (LVR), and whether you'll need to pay Lenders Mortgage Insurance (LMI). It's not just about what you're willing to pay - it's about what the bank believes they could recover if things went sideways.

How Property Valuation Affects Your Home Loan

The valuation report determines several crucial aspects of your home loan:

• Loan Amount: Banks typically lend based on the lower figure between the purchase price and the valuation. If you've agreed to pay $650,000 but the property values at $620,000, you'll only get a loan based on $620,000.
• LVR Calculation: Your loan to value ratio (LVR) is calculated by dividing your loan amount by the property value. A lower LVR often means access to home loan options with lower rates and potentially avoiding LMI.
• Interest Rate Discounts: Properties that value well and result in lower LVRs often qualify for rate discount offers from lenders.

Understanding LVR and Its Impact on Your Application

Your LVR is a percentage that shows how much you're borrowing compared to the property's value. For instance, if you're buying a property valued at $600,000 with a $540,000 loan, your LVR is 90%.

Most lenders across Australia consider anything above 80% LVR as higher risk, which usually triggers LMI. This insurance protects the lender if you default on your loan - and you pay for it. For bricklayers looking to secure their first home, understanding LVR is crucial for calculating home loan repayments and planning your deposit.

Here's what different LVRs typically mean:

1. 80% or below: Generally the sweet spot for owner occupied home loan applications, offering lowest rates and no LMI
2. 80-90%: Usually requires LMI but still accessible with decent home loan interest rate options
3. 90-95%: Higher costs with LMI, fewer lenders willing to participate
4. 95% and above: Limited home loan products available, typically requiring guarantor support or special schemes

Types of Valuations You Might Encounter

There are several valuation methods banks use:

Desktop Valuation: The valuer doesn't physically inspect the property but uses comparable sales data and online resources. These are quicker and cheaper but sometimes less accurate, particularly for unique properties.

Full Valuation: A qualified valuer visits the property, inspects it thoroughly, and provides a detailed report. This is more common for higher loan amounts or unusual properties.

Kerbside Valuation: The valuer drives by the property and assesses it from the street, combined with sales data. It sits between desktop and full valuations in terms of accuracy and cost.

For bricklayers who might be purchasing older properties or planning renovations, a full valuation usually provides the most accurate assessment.

What Valuers Look For

As someone who works with bricks and mortar daily, you'll appreciate that valuers assess properties systematically. They consider:

• Recent comparable sales in the area
• Property condition and construction quality
• Location and local amenities
• Land size and potential for development
• Any structural issues or necessary repairs
• Market trends and demand in the suburb

Your professional eye might spot structural soundness that adds value, but remember that valuers work to specific guidelines and recent sales data, not just construction quality.

When Valuations Come in Lower Than Expected

A low valuation can throw a spanner in the works, but you've got options:

Renegotiate the Purchase Price: Armed with the valuation report, you might convince the seller to lower their asking price to match the valuation.

Increase Your Deposit: If you can access additional funds, increasing your deposit maintains your original loan amount while improving your LVR.

Challenge the Valuation: If you genuinely believe the valuation is incorrect, you can request a second opinion, though this costs extra and isn't always successful.

Look at Different Home Loan Products: Some lenders are more flexible than others. Shopping around to compare rates and access home loan options from banks and lenders across Australia might reveal alternatives.

How Property Valuation Impacts Different Loan Types

The type of home loan you're applying for affects how critical the valuation becomes:

Variable Rate Home Loans: These home loan products typically have more flexibility with valuations, and lenders might be more willing to work with borderline LVRs.

Fixed Interest Rate Home Loan: Because the lender locks in the interest rate for a set period, they're often more conservative with valuations and LVR requirements.

Interest Only Loans: These require lower LVRs since you're not building equity initially, making accurate valuations even more important.

Split Loan Products: Combining variable rate and fixed rate portions gives you flexibility, and valuations apply to the total loan amount.

If you're self-employed as a bricklayer, lenders might be more cautious with both your income verification and property valuations, making it crucial to present a strong application.

Building Equity Through Property Value Growth

Once you're in your property, understanding valuations remains important. As property values increase in your area, you build equity even beyond your principal and interest repayments. This improved equity can help you:

• Refinance to access better current home loan rates
• Remove LMI if you initially paid it
• Improve borrowing capacity for investment properties or renovations
• Access equity for expanding your property portfolio
• Potentially switch from interest only to principal and interest repayments

Regular property valuations through tools like an offset account linked to your home loan can help you monitor your financial position and plan your next move.

Home Loan Features That Work With Your Property Value

Certain home loan features become more valuable once you understand property valuation:

Offset Account: A linked offset account reduces the interest you pay by offsetting your loan balance, helping you build equity faster as property values change.

Portable Loan: If you're planning to upgrade properties, a portable loan lets you transfer your existing home loan package to a new property, subject to fresh valuation.

Redraw Facility: As you build equity and your property value increases, redraw facilities give you access to extra repayments you've made above the minimum.

Getting Home Loan Pre-approval Before Property Valuation

Seeking home loan pre-approval before you start seriously house hunting is smart. While pre-approval is conditional and based on a property you haven't yet chosen, it gives you clarity on your borrowing capacity and helps you target properties within your price range.

Pre-approval typically involves:

1. Assessment of your income and expenses
2. Credit history check
3. Conditional approval for a specific loan amount
4. Validity for 3-6 months in most cases

Once you find a property, the formal valuation happens, and your pre-approval converts to full approval if everything checks out.

Why Bricklayers Should Consider Specialist Support

As a bricklayer, your income structure might include ABN work, contract positions, or hourly rates that fluctuate. Standard banks sometimes struggle to properly assess tradie income, which can affect both your loan application and how they view your capacity to service a mortgage against a property's value.

Working with brokers who understand the trades industry means:

• Access to lenders who properly value tradie income
• Knowledge of which lenders are more flexible with valuations
• Understanding of construction quality that might not show in standard valuations
• Ability to negotiate when valuations impact your home loan benefits

For bricklayers looking to secure future financial stability, getting the valuation right is just as important as laying a level foundation.

Property valuation might seem like just another hoop to jump through, but it's fundamental to your home loan application and long-term financial planning. Understanding how it works puts you in control of the process and helps you make informed decisions about your property purchase.

Call one of our team or book an appointment at a time that works for you to discuss how property valuations affect your specific situation and what home loan options might work for your bricklaying business and income structure.