The first step that is taken by bank of financial institution when a home loan application is received is to have the property valued. This is usually not done by the bank staff themselves. They either have a panel of valuers in their fold or they outsource the activity to some good valuation company Melbourne. What are the reasons for having the properties valued before deciding on the loan amount. Let us try to find some answers for the same.
First and foremost, the loan amount would basically depend on the market value of the property. Though there are some informal ways and means by which the value can be found out, when it comes to lending thousands of dollars of home loan to customers, there ought to be an authenticated and legally accepted source which will be able to give a report on the valuation of the property.
Towards this objective seeking the services of a good and professional property valuer is very important for banks. Only on receipt of the valuation reports are matters taken forward. However, valuing such properties that come up for bank loans is not easy not because of the complexities. It is simply because of the numbers that could be landing on a valuers table. Hence, if you wish to be a successful property valuer for banks you should understand the need to handle to big volumes having very tight and highly demanding time lines.
Whenever a decision to buy a home or some other property is taken, the first thing that comes to our mind is the need to source funds for such purchase. There is no doubt that banks and financial institutions are the major source of funding for most of the customers. However, when applying for a home mortgage loans there are a number of steps that need to be gone through. One such step is getting the property valued by an independent property valuer. Let us try and find out why valuation is very important for mortgage home loans and how exactly it is done.
The main reason why valuation of property in Brisbane is very important for banks and financial institutions is quite obvious and not very difficult to understand. Banks lend money to borrowers for constructing or buying homes and apartments. Once the loan is disbursed, the original documents of the property stands pledged with the banks and therefore the property in question also remains mortgaged to the bank as security. While all this is fine, it is not always possible for the bank to lend money based on the valuation show in the property sale deed alone.
It is here that the role of an independent third party valuer become very important. They help in ensuring that the valuation shown in the sale deed is not way off from the actual market value that the property commands at a particular point in time. This is very important because when taking a lending decision, the banks totally depend on the sale deed price and the valuation report that is generated by an independent third party valuer.
Hence, it is not surprising to see that a major chunk of business for real estate valuers comes only from banks and financial institutions. This goes to prove that property valuation and mortgage home loans are closely interconnected.
It is quite obvious that only 2 out of 10 people would be in a position to buy homes from their own funds without taking recourse to loans. While the dream for owning a own home or apartment is quite overpowering, lack of finance often comes in the way. In such circumstances the only option is to go in for home loans or property loans as they are also referred. Today, almost all banks and financial institutions have become extremely aggressive in lending loans for construction of homes, purchase of new homes or for buying strata-buildings and apartments. Many of the customers often do not do their homework properly when it comes to borrowing home loans. It would not be right on part of the customer just to go in for the first home loan that comes their way. It is important to take such vital decisions after a lot of due diligence. It has to be kept in mind that mortgage home loans are very long in nature and hence they must seek help of the right property valuers in perth to be able to get perfect idea about value of the house.
The first step before going in for any type of home loan is to find out how much you can contribute as your share for such loans. No banks or financial institutions would be willing to fund 100% of the cost of the entire property but for some very rare and extremely special circumstances. Hence, as a borrower you should be ready with your margin money and usually this is around 15% of the cost of the property. The next important thing is to find out how good your credit history or credit score is. This has a major bearing on the quantum of loan, tenor of loan and most importantly the interest rates that will be charged for such loans. Hence, it is always advisable to keep your credit history clean and blemish-free to the maximum extent possible.
You should be willing to move around and do some window shopping and take inputs from as much banks and financial institutions as possible before actually zeroing in on one particular bank or financial institution. You should be all eyes and ears to be on the lookout for some hidden costs in terms of processing fees and other such charges. You should also be well informed to make a choice between fixed rate home loans and floating rate home loans. If the tenor is short then it is better to go for variable rate loans because you will be able to come out of the loan liability that much faster though you may end up paying something more by way of interest.
Since home loans are a long term liability and you also have some tax benefits available against such loans, these figures must also be factored before signing on the dotted line. You should be left with enough funds to run your family. You might be an individual when you might have taken the loan but since many mortgage loans could run for more than 15 to 20 years, you must keep your long term expenses and requirement of funds before committing yourself for such long term liabilities.
There are many banks which also offer the facility of paying back your loan in installments and you should always keep this option in mind. However, you should again do a careful calculation and find out whether it makes sense to reduce your mortgage loan liability or invest the money elsewhere and earn some profit out of it. In fine, while getting a home loan is not a big problem, proper planning and forecasting is of extreme importance.
Whenever a prospective customer applies for bank loans for funding his or her dream property project there are a number of factors that are taken into account before the loan is disbursed. These include the income generating capacity of the individual as of now and also in the future. This is because almost all home loans are long term liabilities. Apart from the stability and long term durability of such income, his credit worthiness is also taken into account. His previous track records as far as other loans are concerned is a clear indicator how good or bad his credit history is.
Apart from the above, the lender would like to know whether he is lending money on a property that is at least worth the loan that the customer is seeking. Though there could be a mention of the value in the sale deed agreement and the market could also talk about a value, banks would like to have it authenticated by somebody who is an expert in valuing. It is here that the role of property valuer becomes very important.
So, whenever a customer approaches a bank or financial institution for a loan apart from finding out the creditworthiness of the customer, the bank’s other important function is to have the proposed mortgage property valued by an expert. These experts are valuers who have rich experience and expertise in this field. They look at the property from various angles and then come out with a valuation report. This report forms one of the important basis on which a credit lending decision is taken.
There are a number of factors that could influence the value of a property from the property appraisers perspective. It could be the location of the property, the age of the property if it is an old one, the size of the property, the type of construction materials that have been used and last but not the least how well developed the neighborhood is. So if you are planning to buy a property as a retail customer it is always advisable to pay attention to the above points because of obvious reasons.
Almost 95% of all the property that is bought in this country is through property loans that are arranged by banks and financial institutions. This is because it is almost impossible for the ordinary salaried or small business owners to arrange huge funds that are required for purchasing an average sized apartment in your city or town. So, there is always a big rush for property mortgage loans as far as banks and financial institutions are concerned. Let us over the next few lines try and find out how property valuers have an important role to play in the entire loan sanction and approval process.
Whenever a customer approaches a bank or financial institution for a loan, the banks looks at the application from two basic angles, risk and credit worthiness. The latter is determined by the previous track history of the customer, his present income earning capacity and his repayment capacity over a long period of time. The former, i.e. risk is evaluated again by various factors and the most important one is based on some points related to the property itself. Whenever a bank looks at a property loan, they would like to know what the property is worth. Though the market is a good indicator as far as the rate of a property is concerned, it may not be prudent to go by this figure alone. It has to be corroborated by an independent authority and this is where the role of a property valuer becomes very important.
Let us look at a simple process flow when a bank receives a property mortgage application. Even before the other steps are taken up, the bankers raises a request with the property valuer to value the property. This report plays a vital role in deciding on the loan amount, the tenor of the loans, interest chargeable and so on. Only if the report is favorable does the bank go in for the next steps. Hence, there is no denying the fact that property valuation forms the backbone based on which loan amounts and sanctions are decided by banks.
This certainly is great news for budding real estate valuers who wish to make it big in their profession. It is all about being steadfast in this business and the results will automatically come. As professional real estate agents you should be willing to put effort, be honest and transparent and give value-add propositions to your customers. You should be a one stop solution for almost any type of real estate valuation that one could think of. It is a long term journey and it would be difficult to expect results overnight.
Why is property valuation so very important? Let us try and find out the reasons especially from the point of view of mortgage loans. Banks extend property loan or mortgage loan to customers based on various factors. They usually take into account the age of the customer, his earning and income generating status, his marital status, just to name a few. His credit rating is also a very important consideration when it comes to taking a loan. Apart from that banks also need to have a comfort level as far as the value of the property is concerned. As a thumb rule, the loan amount that is disbursed to the borrower should never exceed 80% of the market value of the property. But how is market value calculated? There are different ways and means by which this can be done. Banks can take a cue from the value of the property that is evident from the market place. However this is only an indicative rate and there should some ways and means by which this could be authenticated. Towards this objective the role of a government approved valuer becomes extremely important.
Let us try and understand the process flow whenever a bank or financial institution receives a mortgage loan application. While other due diligence processes go on simultaneously, the first act of the bank is to send the property details to a registered and government approved valuer. His job is to carefully look at the property and then come out with a valuation figures taking into account a number of factors. This document forms a very important decision making piece of information for the bank. Even if the customer holds a good job and draws a decent income, banks may not fund his full loan requirement unless the value of the property justifies it. This is because when the valuation specialists submit their valuation report, they take a lot of things into consideration. They take into account the condition of the property, the age of the property, the neighborhood in which the property is located and the area in which the property falls. The infrastructure facilities available, the transport facilities available, and quite a few other factors are also taken into account when submitting the valuation report.
Hence, as a customer you would always do better to look for properties that are located in reasonably well developed areas. Though it might cost a bit more it is worth it because you will be reasonably sure that your bankers will be ready to fund almost the entire cost of the loan. Towards this objective, there hardly is any doubt that valuation has an important role both for the banks and also the customers desirous of taking loan from them.
While buying a new home certainly is an once-in-a-lifetime event for many persons, most of us have to look up to banks and financial institutions for funding the cost of the property. This is what mortgage loan all about. For those who have not gone through the process of applying for property loan, the whole thing might look complicated and difficult. However, if you gather some knowledge and information, you would be in a better position to understand it and know that after all it is not as difficult as it is made out to be.
Understanding a few things would certainly help you to get the best out of your mortgage loan. You should be able to have a clear idea about the interest rates that are being charged on the loan. There are basically two types of interest; the first one is fixed interest and the other one is floating interest rate that is aligned to the market rates. You have to weigh the pros and cons of both options and choose the one that suits your needs perfectly.
The next important aspect is the tenor of the loan. Though you may be paying a lower EMI on a higher tenor, your interest outgo will be higher for such long term loans. While your endeavor should be take lower tenor loans, you should be sure that you will be able to service the EMIS comfortably.
The importance of your credit history is something that cannot be understated. The higher your credit score, the better your interest rates will be. You could also aspire for a higher loan amount and the repayment period could also be liberal if your credit history record is clean and unblemished.
Last but not the least, you should understand the importance of processing fees and other such charges that are built into the loan. You should carefully have a look at them because it could push your interest rates quite significantly.
There are quite a few things that are taken into account when you are borrowing money for building your dream home or buying that majestic apartment. While there certainly are a number of banks and financial institutions which are ready to lend, you have to bear in mind that there are certain factors and criteria that decide on your loan amount, the repayment tenor, the interest rates and other such factors.
In this particular article we will have a look at the importance of borrower power as far as your loan eligibility is concerned. Calculating borrowing power is not very difficult as it seems to be. There are different online calculators which could help you to do it. Simply put borrowing power is the maximum amount of loan that you could be eligible after factoring all the expenses that you need to incur on a monthly basis.
For example, whenever you get a monthly income from your business or job, you have some regular expenses for running the household. Further, you also could have a few more monthly liabilities to repay such as car loans, personal loans, and credit card dues and so on. Once all these have been paid off you could still be left with some surplus funds. Usually banks and financial institutions take into account this surplus which is often referred to as your borrowing power. The higher is your surplus the higher your borrowing power is supposed to be. This will enable you to get a higher loan amount, for a longer tenor and perhaps even at a much lower rate of interest.
When evaluating the borrowing power banks also take into account your expected future cash flows. Here your current age, number of years’ service or business life left and a few more points could be of extreme importance.
There are thousands of customers who go in for home loans without actually understanding the main differences between fixed rate home loans and variable rate home loans. This is not the way loans are taken and it is imperative on the customer to find out which is less expensive when looked at from a long term perspective. First and foremost, a fixed rate home loan is one where the interest rate is fixed when the loan agreement is signed. It does not change over the life of the entire loan. On the other hand variable rate home loan is one where the interest rates keep changing because they are linked to the market. Any upswing or downswing in interest rates will impact the borrowers’ monthly outgo which could be to his advantage or disadvantage.
There are some benefits as well as disadvantages with both these types of loans. For example if you are going in for a short term mortgage home loan, you would be better off opting for the floating rate home loan because you know you have the loan burden only for a limited period of time. On the other hand if you have a loan commitment that runs beyond 10 years, you would do better to look out for variable rate home loans because when you look at the whole outgo in totality and compare it with fixed rate home loans, you would saving a few thousand dollars.
When settling for either of the above options, you have to bear in mind that the lower your interest rate is the higher is the payment towards your principal. This is something that you should factor in while going in for home loans. Today, some banks also allow you to migrate from fixed rate loans to variable rate loans which option also you should try and discover.
Before getting toidentify the right property valuers, it is very important to learn and define who exactly is a property agent. They are without any doubt a very important link between the buyer and seller and therefore to begin with he or she should be a person on whom you can place a lot of trust and belief. He should be a person on whom you can handover the entire process of buying or selling of a property. For all practical purposes he will be representing you and will be another part of you as a person so to say. Hence, trust and faith are the two unshakeable foundations on which a good property agent must be chosen.
This apart, you should always look for a property agent who is registered and licensed. This will help you to have a sense of comfort in case should something go wrong. The next important fact that should be kept in mind while choosing property agents is their overall reputation and goodwill in the neighborhood or the city or town where they are operating. At the day of the day, as mentioned above the work of a property agent is based on total faith and trust and any agent who has a good reputation and goodwill should by default be having these two attributes.
A good property agent is one who is well networked and also must have a very good knowledge about the geography and topography of the city, town or area that he is catering to. He must have in his finger tips the names of all the major promoters apart from also having the name of the individual property sellers and buyers. He would also do well to have a good relationship with banks and financial institutions. This is because many customers would not mind taking his help for moving their mortgage loan applications forward.