What is the impact of valuing a property?

Need help with issues related to getting a home loan? Why not turn to a credit intermediary who will handle everything for you, facilitating the conditions you will have access to? The service from Poupança no Minuto is quick and free. But first understand how the evaluation of a property works.

How does the evaluation of a property work? 

The evaluation of a property aims to reach the real value of a property, for the establishment of a housing credit. This is so that the bank understands how much the property is worth and, consequently, the loan to be granted. Considering that the evaluation of a property will have a direct impact on the amount you pay as a down payment for the credit.

Thus, it can be done in two situations: when you are going to take out a new mortgage, or when you are going to transfer your mortgage to another bank. This is because if the property was bought years ago, the appraisal value will be different from the initial one.

But how is the assessment carried out and what factors influence it? The property is appraised by a specialist, at the cost of the property buyer through the assessment commission charged by banks. Normally, it is the banks that hire the appraisal experts, but as a consumer, you can also do an independent appraisal to have an idea of the estimated value of the property.

You can hire a property evaluation through four types of evaluators: 

• Companies or specialized technicians with their own businesses;  
• Free real estate evaluation websites;  
• Geographical evaluators provided by the Finance Portal;  
• Independent real estate appraisal services regardless of banks. 

As a consumer, you should also have access to the evaluation report and not just your bank. This is a recommendation from the Bank of Portugal, so you don't get deceived.

What are the parameters that influence the evaluation value? 

The value of a property assessment depends on certain factors that are analyzed in the housing. Such as: housing.

• The location, floor, view, solar orientation, and accessibilities;  
• Construction quality;
• Date of construction;
• Conservation status;
• Land on which it is located;
• Typology and disposition;
• Finishes;
• Furniture and/or equipment available;
• Parking, pool, elevator, surrounding spaces, among other amenities;  
• Current market.

The more and better these parameters are, the higher the value at which the housing is appraised. And the higher the appraisal value, the more advantageous the consumer who will contract the housing loan will be.

This is because it can impact the final financial conditions, such as the spread attributed to the final loan-to-value, the financing term, and the amount you will pay as a down payment for the loan, as we will see next.

What impact can the property appraisal have on the down payment value?  

This is a factor that clients often overlook. However, it is essential to realize that the property evaluation can significantly alter the amount you have to give as an initial down payment in equity, and why. This factor can influence either positively or negatively.

So, let's see... In a mortgage loan, currently, the bank finances up to 90% of the property value, if it is intended for own and permanent housing, and 80% of the property if it is intended for secondary housing. But there is an important factor here: The bank lends the percentage corresponding to the lowest value of the property, between the acquisition or evaluation.

With an example, it might be easier. If you are buying a property for 285,000 euros, that is the purchase price. But if the property is later appraised at a value of 270,000 euros, that is the appraisal value.  

And what is the impact of the acquisition value being different from the appraisal value? For example, if initially the bank proposes to lend you 90% of the value, the simulation you performed was based on the acquisition value. In other words, you needed to have 28,500 euros in equity (10% of 285,000 euros). But if after that the property was appraised at 270,000 euros, the bank will only lend 90% of this lower value. However, the acquisition value you have to pay to the owner remains the same.  

So, if the bank only lends, as a final proposal, 90% of 270,000 euros, that is, 243,000 euros, you need to provide the missing amount up to 285,000 euros, corresponding to 42,000 euros. Therefore, the property appraisal value can make all the difference in the initial cost you will have in buying a house!

Because now imagine that the property was valued at the same or higher amount of purchase, the bank would take into account the 285,000 euros for financing. And between giving 28,500 or 42,000 euros as a down payment, there is a difference of 13,500 euros on the table. A value that could cover the cost of taxes that still need to be settled when buying a property.

In other words, it is important to be informed in advance about these issues and to use a good property evaluation service. The more specialized the service is, the more detailed the evaluation report will be, providing more assurance that it is realistic.  

So, why not turn to market professionals to help ensure the best services? Contact Poupança no Minuto to mediate your housing credit, and make sure that nothing fails as you had planned.