Here is How Banks Assess Property Value during Home Loan Application
Jun 12, 2018 Home Loan
Almost everyone applies for a home loan while buying a new home or property. Banks offer lucrative discounts and offer to attract consumers and for that, they evaluate the property to ensure that they don’t have to bear any loss. But have you ever thought how the property gets evaluated by banks? Nobody is aware of that.
So here are some points to making you understand how the evaluation is done by the banks.
So here are some points to making you understand how the evaluation is done by the banks.
Property usage
The valuation of different properties depends on the way they are used. Such is a residential property is being used as a warehouse then its valuation would be less. In addition, the nature of property like whether it is residential, commercial, agricultural or industrial, all the properties would be valued differently. The valuation of the property also depends on the fact that whether the property is vacant, rented or it is being used by the owner. Banks usually do not prefer approving the loan for those that they feel are at risks. For instance, some zones are in the earthquake zone or in flood zone, so such properties are not valued properly.
Quality of the property
Banks also look into the quality of the property. For instance, if the construction is unauthorised then the banks would not approve the home loan. As a buyer also you need to sure of the construction as the property is an asset. You must remember that the property should not be bought for it higher valuation but also from the safety purpose as well.
The age of the property
Age matter a lot while evaluating the property. The less the age of the property, more is the value. Such as for an independent house, 60 years is considered to be the total useful age. So, if you are selling a house after 20 years of construction then selling price minus depreciation is calculated by the formula - Number of years after construction divided by the total useful age of the building. Banks calculate in this way.
Documents should be in place
In case of unauthorised construction, you would not get any loan, whereas legal construction provides all the necessary documents in place such as sanction plans and approvals, occupancy certificate, society registration documents among other documents. It is better to arrange and keep all of these documents in a proper manner for the bank’s perusal.How maintained is the property: banks do check the condition of the property. Surprisingly old and well maintained houses have a higher value as compared to the new and untidy properties that are valued at a much lower rate.
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