Which amount is considered by bank for provide a home loan?

Is it considered what is mentioned in the sale agreement?

Or is it considered the actual market value of property?
  • 5
    The amount in the sale & purchase agreement, if recent, is the actual market value.
    – Lawrence
    Oct 6, 2019 at 8:01
  • @Lawrence not getting your point. Oct 6, 2019 at 8:45
  • 2
    The market value of real estate is defined as what people are willing to pay for it. So if you recently bought it, what you were willing to pay for it (and what the seller was willing to accept) is its market value, assuming it was an arm’s length transaction.
    – Lawrence
    Oct 6, 2019 at 10:30
  • What country is this? The procedure used to establish the value may depend on the country. Oct 6, 2019 at 11:41
  • 2
    @mhoran_psprep I’m not answering the question in comments. I don’t know what amount the bank uses as its basis; I’m just noting that the two options provided by the OP aren’t separate options.
    – Lawrence
    Oct 6, 2019 at 12:34

3 Answers 3


Each bank makes its own decisions regarding the value used as the basis of the mortgage, and I can’t say definitively what that basis is. However, in Australia (and I’d imagine elsewhere as well), they would often (always?) have their own valuer to determine the value of the property.

Consider the risks borne by the bank in extending a mortgage: principal and interest to be repaid over a long period. Even if the owner falls on hard times, the bank would still want to be paid, hence the use of the property as collateral - they can sell the house to recoup their funds.

The risk is that the house is worth less than what they want to recoup. So it makes sense for the mortgage to be based on what the bank thinks it can sell the house for, with enough contingencies built in to account for costs of sale, including how long the property might have to sit unsold before a willing buyer is found.

On this basis, I’d expect the bank to use what they deem to be the market price of the property as the starting point of their mortgage decisions.


What the bank has to consider is the market value because that's an indication of what they could resell the property for if the debtor defaulted.

That's also why banks normally do their own valuation of a property.


It is the market value. Most banks would independently evaluate the property value. Generally it should be similar to the agreement value.

The reason for independent evaluation of market value is to rule out fraud. I.e. there are individuals who can inflate the agreement value on paper and get the loan and stop paying. In this case bank is left with property of lesser value.

  • Thanks to all guys for answer my question. @Dheer market value of the property is higher than govt. value which i mention in agreement. So if bank is consider this agreement value for homeloan then i can not get require homeloan amount. Oct 8, 2019 at 5:10
  • @Camit1dk If the agreement value is less than market value, Bank would treat this amount for determining the loan amount.
    – Dheer
    Oct 9, 2019 at 13:30

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