Valuations & Stamp Duty

Welcome to part III of our Ask a Broker series with Mark Polatkesen, Director and Senior Broker with Mortgage Domayne. In our final instalment of this series, Mark takes us through what you need to know about valuations, stamp duty, and land tax.

Why do I need a valuation for my property purchase?

When a lender provides you finance to buy a property, the property itself becomes the security for the loan. If you were to default on your mortgage repayments, the bank has the right to sell the property to make back its money, and that’s where the importance of valuations come in. Essentially, the lender needs to know that the value of the property covers their loan cost.

In the case of house and land contracts, it’s important to understand that your lender will order two different valuations, one on the land and one on the build. Together they will add up to a completed valuation. Valuers do this by looking at comparable property sales over a recent six-month period, where comparable means similar size land, similar build, and similar location.

What do I do if the valuation comes in lower than I expected?

I’ve seen some pretty big fluctuations in valuations in my time. And one of the benefits of going with a broker, is that we aren’t stuck using the one valuer preferred by your bank. We can go to different valuers at different lenders to make sure we get a full picture and advise you on the best solution for you. A good way to ensure your valuation stays within a comparable range is to ensure you’re not over capitalising on upgrades that would be hard to recoup if you had to sell the house.

What is stamp duty and do I have to pay it?

Stamp duty is a levy imposed by the State Government and collected by the State Revenue Office that occurs every time a property is sold. The exact amount of stamp duty is calculated based on the property’s dutiable value, how you use the property (for example, principal place of residents or investment), and whether you are eligible for any concessions or exemptions. In Victoria, there are a range of concessions and exemptions for first home buyers, so this is something to ask your mortgage broker about when you’re compiling your loan application.

Finally, what is land tax and how do I work out if I owe it?

Land tax is not something your lender or broker has much to do with and we normally point people in the direction of the State Revenue Office to discuss this. Land tax is only applicable on certain types of land, including vacant land for future residential purposes, so we encourage people to ring up the revenue office directly to understand how the rules apply to them specifically, because it does vary quite a lot.