Refinancing

What happens if the refinance valuation is too low?

A lower valuation increases the calculated LVR and can reduce cash out, pricing or approval options.

Short answer

If the lender values your property below expectations, the proposed loan becomes a higher percentage of the security value. That can reduce available cash out, move the loan into a more expensive LVR tier, trigger LMI or place it outside policy. It does not necessarily mean the refinance is over.

Check the report and the proposal

Ask whether the valuation was automated, desktop or physically inspected. Check that the property details, land size, bedrooms, improvements and recent comparable sales are accurate. A valuation challenge needs relevant evidence, not simply disagreement with the figure.

Correct factual errors promptly.
Provide recent genuinely comparable sales.
Reduce the loan or cash-out amount if possible.
Consider another lender only after checking the full fit.

Different lenders can reach different values

Lenders use different valuation firms, risk settings and automated models. Another lender may obtain a different result, but repeated valuations do not guarantee a higher figure. The next lender's credit policy and loan cost must also remain suitable.

How the LVR changes

A $600,000 loan against an expected $800,000 value has a 75% LVR. If the accepted valuation is $720,000, the LVR rises to about 83.3%. That change may affect pricing and could introduce LMI or a lower maximum loan. If cash out is optional, reducing the loan to $576,000 would return the LVR to 80%. Use the accepted value to recalculate the entire proposal before deciding whether to challenge or change lenders.

What makes a useful valuation challenge

Evidence should be recent, nearby and similar in land, building, condition and property type. A renovated four-bedroom house is not directly comparable with an unrenovated two-bedroom property, even on the same street. Provide invoices or approvals for improvements that the valuer may have missed. An asking price, online estimate or owner's opinion is weaker than a settled comparable sale. The valuer may review the evidence and still retain the original figure.

Choose the response that fits the objective

If the refinance still saves money without cash out, reduce the loan and proceed. If the valuation changes the rate, recalculate the break-even period. If the property is unusual, another lender with different security policy may help. If no suitable result is available, waiting for more debt reduction or clearer comparable sales can be sensible. Do not order multiple applications merely to search for a preferred number because each lender must also assess income, expenses and credit.

Questions to ask before you proceed

What is the net saving after every discharge, application, valuation and ongoing fee?
How long is the break-even period if the remaining loan term stays the same?
Which valuation, income or policy issue could still change the approval or pricing?

Key takeaway

Recalculate the LVR first, then correct errors, adjust the loan or compare another suitable lender if needed.

Official guidance: APRA: Residential mortgage lending guidance

This is general information, not personal financial, tax or legal advice. Lending criteria, fees and eligibility vary.

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