Valuation and purchase price: what happens if your home values low
Banks calculate the mortgage on the lower of price and valuation. What to do if the valuation comes in low and how it affects the savings you need.
1 min read
You agree a price, apply for a mortgage and the valuation arrives: it is lower. This is common in fast-rising markets, and it pays to know what to do.
Why it matters
Banks usually calculate financing on the lower of purchase price and valuation.
An example
You buy for €400,000. The valuation is €360,000. At 80%, the loan is €288,000 rather than €320,000. You need to put in €32,000 more, on top of taxes and costs.
Your options
- Negotiate the price with the valuation in hand.
- Increase your contribution.
- Ask another bank, knowing it must accept a valuation that complies with the rules.
- Check the report for objective errors, such as the area.
- Withdraw, if your contract allows it.
Protect yourself before the deposit
This is where the deposit contract matters. Without a financing condition, you may lose the deposit over a low valuation. Before paying, ask the bank for a simulation and include an exit.
Who pays and who values
The person applying for the mortgage pays for the valuation, and an approved firm must carry it out. You have the right to provide a valid and current valuation: the bank cannot impose another if yours meets the requirements.
A final note
A valuation measures a value under certain rules. It does not tell you whether it is a good purchase.
