What happens if the bank valuation is lower than my purchase price?

A bank lends against the lower of the purchase price or its own valuation. If the valuation comes in below the agreed price, the gap must be paid in cash, not CPF or loan. Checking the valuation during the Option to Purchase window, before exercising, keeps a buyer's options open.

What is Bank valuation? — Singapore property glossary

What is Bank valuation? A bank valuation is a lender commissioned assessment of a property's market worth, used to decide the maximum loan amount. A bank lends its Loan to Value percentage against the lower of the purchase price or the valuation, so when valuation comes in below the agreed price, the shortfall, sometimes called cash over valuation, must be paid in cash.

Every home loan application in Singapore involves a bank commissioned valuation, separate from whatever price the buyer and seller agreed. The bank then lends its LTV percentage, 75 percent for a first residential loan with no other mortgage outstanding, against whichever figure is lower, the transacted price or the valuation, not automatically the price paid.

When the valuation lands below the agreed price, the loan shrinks accordingly and the gap has to be made up in cash; CPF and the loan are both computed against the valuation, not the higher transacted price. For HDB resale flats this cash gap is commonly called Cash Over Valuation, COV, but the same mechanic, a shortfall funded entirely in cash, applies to private resale and new launch purchases too.

The practical protection is timing: checking the valuation during the Option to Purchase window, before exercising, preserves the ability to renegotiate the price with the seller, seek a second valuation from another bank, or walk away if the gap is too large to absorb.

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Winfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H). CEA R073319H. This page is for general information only and does not constitute financial, investment, or legal advice. Verify current figures with IRAS, HDB, CPF Board, or MAS before making any decision.

Bank valuation

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