What happens if the bank valuation comes in low?

You signed on Saturday. $640,000 for a three bedroom place in Hoppers Crossing.

On Wednesday your lender rings. The valuer has come back at $620,000.

Nobody did anything wrong. But there's now a gap between what you agreed to pay and what the bank thinks the home is worth, and someone has to fill it.

Why the valuation matters more than the price

When you apply for a loan, the lender usually sends a valuer to look at the property. The valuer compares it with recent sales nearby and gives the lender a figure.

Most lenders then work out how much they'll lend from the lower of two numbers, the price you agreed or the valuation.

Here's what that does to the maths. On a $640,000 purchase with a 5% deposit, you'd expect to put in $32,000 and borrow $608,000.

If the lender instead lends 95% of $620,000, the loan drops to $589,000. You still owe the vendor $640,000. That's $19,000 more you need to find before settlement.

Why it comes up more when prices move

Prices have softened in parts of Melbourne's west lately. A valuer looks backwards, at what similar homes have already sold for.

So when the market shifts, a price you agree this week can sit above what last month's sales support. Valuations can also come in under the price on some new estate and house and land purchases, where there are fewer settled sales to compare against.

Falling prices can be good news for buyers. They can also make the bank more cautious about what your home is worth.

If you'd like to talk through how this works with your own numbers, book a chat.

What it means on the 5% deposit scheme

The 5% Deposit Scheme lets you buy with a 5% deposit and no Lenders Mortgage Insurance, up to a price cap. In Melbourne that cap is $950,000.

Housing Australia says the deposit is 5% of the Property Value, and that the Property Value is assessed by the lender. It can be different from the purchase price.

Two things follow from that.

• Your deposit is worked out on the valuation. If the valuation is low, the gap between it and the price comes out of your savings on top of the 5%.
• Both numbers must fit under the cap. The price you sign and the lender's value both need to be at or under the price cap.

Stamp duty doesn't move down with a low valuation either. In Victoria it's worked out on the price you paid, or the market value if that's higher. So the $600,000 exemption line is tested against the price on your contract.

What your options usually look like

• Cover the gap from savings. Simple if the money's there, but check what's left for moving costs.
• Ask about a review. Sometimes a lender will reconsider if there are recent sales the valuer missed. A different lender may also order its own valuation.
• Family help. A family guarantee or a gift can sometimes bridge the gap, with real risks for the person helping.
• Talk to the vendor. If you still have a finance clause running, there may be room to renegotiate.

That finance clause matters. In a standard Victorian contract, the sale can be made subject to your loan being approved by a set date. If it isn't, you may be able to end the contract and get your deposit back. The exact wording and deadline decide that, so your conveyancer is the one to ask. Buy at auction and there's usually no finance clause at all.

How buyers keep the gap small

You can't control the valuer. You can control how exposed you are.

• Look at recent sales yourself. If the homes around it sold well under your price, a valuer will see that too.
• Leave some savings unspoken for. A buffer beyond the deposit and duty gives you room to absorb a small gap.
• Ask about valuations early. Some lenders can value a property before you sign, which takes the surprise out of Wednesday.
• Keep a finance clause where you can.

I've helped over 100 first home buyers into the market, and a short valuation is one of those things that's far easier to handle when you've planned for it. If you'd like to go through it before you sign, book a chat.

Let's get you into a home.

Figures verified 23 October 2026 against Housing Australia (First Home Guarantee FAQs), the State Revenue Office Victoria (dutiable value) and the REIV (5% Deposit Scheme price caps).