If you’re buying a home or refinancing, you’ve likely come across the term property valuation during the loan process. But what role does it actually play—and how can it make or break your mortgage approval?
In this article, we explain how property valuations Melbourne buyers and refinancers often rely on fit into the lending process in Australia, what to do if your valuation comes in low, and how to prepare for a smoother finance journey.
Why Banks Require Property Valuation
When you apply for a mortgage, your lender doesn’t just take your word for what the home is worth—they want a formal, independent opinion. That’s where a property valuation comes in.
Valuations help lenders:
- Determine the security value of the property in case of default
- Calculate your loan-to-value ratio (LVR)
- Ensure you’re not borrowing against an overvalued asset
- Reduce their lending risk
Most banks will organise the valuation themselves using a valuer from their panel. Some charge a fee, while others include it in the application process. In high-demand areas, like Melbourne, this process is especially important to confirm market value.
How Valuation Affects Loan Amount
A lower-than-expected valuation can impact your borrowing capacity. Here’s how:
If the Valuation Comes in Low
Let’s say you agreed to pay $750,000 for a property, but the bank’s valuer assesses it at $710,000. The lender will base your loan amount on the lower figure—not your purchase price.
So if your LVR is 80%:
- Based on $750,000: You expected a loan of $600,000
- Based on $710,000: Your maximum loan is now $568,000
- Result: You’ll need to come up with an extra $32,000 to make up the shortfall
This scenario is not uncommon in fast-moving markets like Melbourne, where price expectations can vary between buyers and valuers.
If the Valuation Meets or Exceeds Purchase Price
Your loan is approved as planned, and you may even avoid Lender’s Mortgage Insurance (LMI) if your LVR stays under 80%.
What Factors Affect the Valuation Outcome?
The valuer will consider:
- Recent comparable sales in the area
- Condition of the property (maintenance, upgrades, issues)
- Location and zoning (school catchments, transport, amenities)
- Floor plan, size, and liveability
- Market conditions at the time of valuation
For property valuations Melbourne homeowners or investors receive, factors like proximity to trams, schools, and the CBD can heavily influence outcomes. Even minor issues such as poor presentation or limited parking can reduce the assessed value.
Tips to Avoid Valuation Shortfalls
You can’t control the market—but you can improve your chances of a solid valuation:
- Present the property in its best light during the inspection
- Provide renovation records and building approvals to demonstrate added value
- Know your market—if you’re buying in a heated area, check comparable sales yourself
- Get pre-approval first, then use that lender’s preferred panel to avoid mismatched expectations
- Work with a mortgage broker who can help challenge or appeal a low valuation if needed
This advice is especially relevant in property valuations Melbourne clients encounter, as local market knowledge is essential for accuracy.
Can You Challenge a Low Valuation?
Yes, but it’s not always successful. Here’s how:
- Request a copy of the valuation from your lender
- Provide evidence of comparable recent sales that may have been overlooked
- Ask your broker or lender to escalate the report for review
- Seek another valuation from a different lender (though this may reset your application)
It’s rare for a valuer to change their assessment without compelling, documented evidence. In property valuations Melbourne suburbs especially, timing and new sales data can sometimes support a revaluation.
How Property Valuation Can Work in Your Favour
A strong valuation doesn’t just support your current purchase—it can help you:
- Avoid LMI by keeping your LVR under 80%
- Refinance at a better interest rate due to increased equity
- Release equity for renovations or investment
- Negotiate with confidence if a sale falls through or you discover a better property
Many property valuations investors receive have opened doors to growth opportunities simply by reflecting rising equity.
Conclusion
The property valuation step may seem like a formality, but it can be one of the most influential stages of your home loan journey. A well-prepared property, up-to-date records, and local sales knowledge can help you avoid delays, loan reductions, or unexpected out-of-pocket costs.
If you’re planning a purchase or refinance, particularly in Victoria, understanding property valuations Melbourne professionals provide is essential. Start by speaking with a qualified broker or financial adviser to understand how valuations could impact your specific situation. In Australia’s evolving market, being prepared is your best asset.