Quick answer
A second mortgage lender sets its own property value, and that value drives everything else: combined LVR, the maximum loan and the equity buffer. Smaller loans on standard homes can often rely on a desktop or kerbside valuation, which is faster. Larger loans, commercial property and unusual properties usually need a full valuation with an inspection by a registered valuer.
Key points
- The lender's value, not your estimate or an agent's appraisal, sets the LVR.
- Desktop and kerbside valuations are faster; full valuations are more thorough.
- Commercial, rural-residential and unusual properties nearly always need a full valuation.
- Recent comparable sales and access for the valuer are the two biggest time-savers.
- Fastest
- Desktop / automated
- Most thorough
- Full inspection
- Who orders it
- The lender
- What it sets
- LVR, loan size, buffer
Why is the valuation the hinge of the whole loan?
Every number on a second mortgage hangs off the property value. The combined LVR is total debt divided by value. The maximum loan is value times the lender’s ceiling, less the first mortgage. The buffer is value less total debt. Change the value by 5% and all three move at once.
That’s why second lenders never simply accept an owner’s estimate. They order their own valuation, and they read it conservatively because they rank behind another lender.
What are the types of valuation, and when is each used?
| Type | How it works | Usually suits | Speed |
|---|---|---|---|
| Automated / desktop | Valuer or data model uses sales data and property records, no inspection | Smaller loans on standard residential property with plenty of comparable sales | Fastest |
| Kerbside (drive-by) | Valuer views the exterior and street, combines with sales data | Mid-sized residential loans | Fast |
| Full valuation | Valuer inspects inside and out, measures, photographs and reports | Larger loans, commercial property, unusual or high-value homes | Slowest |
The lender chooses the type based on loan size, combined LVR and how easy the property is to value. A small second mortgage on a suburban house at a comfortable LVR might need only a desktop assessment. A $2 million loan over a warehouse will almost always need a full report.
What does a valuer actually look at?
- Comparable sales. Recent sales of similar properties nearby are the backbone of any residential valuation.
- Land and improvements. Land size, zoning, building age, condition, layout and any additions, approved or otherwise.
- Income (commercial). For leased commercial property, rent, lease terms, tenant quality and vacancy risk.
- Marketability. How quickly the property could sell and how many buyers it would attract.
- Title matters. Easements, covenants and anything else registered that affects use or value.
That last point overlaps with a title search. Our guide on ordering a title search shows what to look for before the valuer does.
How do you avoid a valuation surprise?
Most “low” valuations are really high expectations. A few habits keep the gap small:
- Use recent sales, not listings. Asking prices aren’t evidence. Look at what similar properties actually sold for in the last six to twelve months.
- Be candid about condition. A kitchen from the 1980s or an unapproved extension will be noticed.
- Provide leases for commercial property. A signed, current lease with a solid tenant supports the value.
- Make access easy. A named contact and flexible inspection times shorten the wait.
- Leave headroom. Plan your request using a slightly conservative value. If the valuation comes in higher, great.
Need a quick sense of what a conservative value does to your numbers? Run two scenarios in the equity and LVR calculator, one at your estimate and one 10% lower.
How does valuation type affect speed?
For urgent files, valuation is often the step that decides whether same-day funding is realistic. Where a desktop or kerbside valuation is acceptable, the value can come back quickly. A full valuation depends on the valuer’s diary and inspection access. On residential property from $20,000 to $250,000, same-day funding is possible when the valuation doesn’t hold things up; we explain the other speed levers in urgent second mortgage finance.
If you’re working to a date, tell us the deadline along with the property details, and we’ll say which valuation path is likely before anything is ordered.
How is commercial property valued differently?
Commercial valuations lean heavily on income. For a leased property, the valuer looks at the rent, the remaining lease term, rent reviews, who pays outgoings and how reliable the tenant is, then compares that income with yields on similar sales. A property leased to your own business is valued too, but lenders may look through the related-party lease and value it more like a vacant building. Vacant commercial property is usually valued on comparable sales and how long it might take to find a buyer or tenant. Our page on second mortgages over commercial property covers how that feeds into the LVR a lender will accept.
Is the first lender’s valuation used?
Generally not. The first lender valued the property when it made its loan, possibly years ago, and its valuation is addressed to it. The second lender needs a current value it can rely on. An older valuation can still be helpful background, particularly if it describes improvements or zoning details that aren’t obvious.
What if the value comes in lower than you need?
You still have choices:
- Reduce the amount to what the value supports and fund the rest another way.
- Add a second property to lift the total security. See second mortgages over two properties.
- Challenge with evidence if there are genuinely comparable sales the valuer missed. This only works with real sales, not opinion.
- Change the pathway. A full refinance or an unsecured facility might fit better. Compare them in second mortgage vs refinance.
Want a realistic view of value before anything is ordered?
A specialist can often tell you from the address and recent sales whether your estimate is in the right range and which valuation type is likely, before any fee is incurred. The enquiry takes about 60 seconds and doesn’t involve a credit check when you first enquire.
We don’t spread your details across a list of lenders. One specialist looks at the property and your purpose, then calls you back. Please give your honest estimate of value, not the hopeful one; that way the loan we map out survives the lender’s own valuation.
Frequently asked questions
Can I use my own valuation?
A recent valuation you already hold can be useful background, but lenders normally rely on a valuation they order, addressed to them, from a valuer on their panel.
How long does a full valuation take?
It depends on the valuer's availability, the property type and access. Standard homes in metro areas are usually quicker than commercial or regional properties. Clear access and a contact person for the inspection help.
What if the valuation comes in low?
The combined LVR rises and the maximum second mortgage falls. Options include borrowing less, adding security, or asking the valuer to consider further comparable sales if there's a genuine case.
Is an agent's appraisal the same as a valuation?
No. An agent's appraisal estimates a likely selling price to win a listing. A valuation is a formal opinion of value prepared for lending, usually more conservative.
Who pays for the valuation?
Valuation fees are generally paid by the borrower, either upfront or out of the loan at settlement. The amount depends on the property and the type of valuation.