You’ve been in your home ten years. You’ve never really kept track of what it’s worth, but you’ve seen a few places sell down the road and you reckon you’re sitting on around $1.2 million. Interest rates, a renovation, consolidating some debt, helping the kids — whatever the reason, you’re thinking about refinancing.
So do you actually need an appraisal before you refinance? And if the bank does its own valuation anyway, why would you bother getting a real estate agent involved first?
After more than two decades selling homes across the Perth Hills, here’s my honest answer: getting an agent appraisal before you refinance costs you nothing, takes 15-30 minutes, and can save you from a mistake that follows you around for five years. Let me explain why.
First, Understand the Three Types of Valuation
Most homeowners don’t realise there are three completely different types of property valuation, and they get used for different things.
1. The bank’s AVM or desktop valuation. This is an automated valuation — the bank’s valuer uses a computer system and doesn’t physically visit your home. Banks typically use this when you’re borrowing at a lower loan-to-value ratio (under around 70-80%), where their risk is lower.
2. The full licensed valuation. This is ordered by the bank after you submit your finance application. A licensed valuer physically attends your property. This is the valuation banks and courts must use — they’re required to under the rules set by APRA (the Australian Prudential Regulation Authority). It’s the official, legally recognised figure.
3. The real estate agent market appraisal. This is what I do. It is NOT a licensed valuation — real estate agents legally cannot provide those, because we don’t fall under APRA. What an agent appraisal gives you is an informed, experienced read on where your property sits in the current market. It’s the starting point that helps you, and your finance broker, understand your position before you go anywhere near a bank.
The process usually flows like this: you get an agent appraisal to understand your value, your broker uses that to build your application, the application goes to the bank, and then the bank orders its own full licensed valuation.
Here’s the part most people don’t expect.
Why the Bank’s Valuation Almost Always Comes in Lower
When I appraise a property before someone refinances, I always tell them the same thing: the licensed valuation that the bank orders will usually come in lower than my figure. Often 10-15% lower. Sometimes more.
This isn’t because I’m inflating the number or the valuer is being difficult. It’s because the licensed valuation is answering a completely different question.
My appraisal answers: “What could this property realistically sell for on the open market?”
The bank’s licensed valuation answers: “If this borrower defaults and we have to repossess and sell quickly, what’s the safe figure we could recover?”
Those are two different numbers for two different purposes. To put it bluntly, the licensed valuation is the bank covering itself.
Here’s a worked example. Say your home is worth $1 million on the open market and you want to borrow 90% — that’s a $900,000 loan. If the bank ever had to repossess and sell, they don’t need to chase the full $1 million the way you would. They only need to recover $900,000 to cover what they lent. A conservative valuation protects that position and means their lenders mortgage insurance doesn’t need to be claimed.
So when your bank valuation comes back lower than you hoped, it doesn’t necessarily mean your home isn’t worth what you thought. It means the bank was never trying to tell you your market value in the first place.
The Five-Year Mistake Most People Don’t See Coming
Here’s the warning that matters most, and the reason I tell people to get an appraisal before they apply, not after.
The bank only does its valuation AFTER you submit your finance application — because the bank pays for it, so they won’t order one before you’re actually in the process. That means if you go in with a wrong idea of your value, you can find out the hard way.
If your application gets knocked back — because your loan-to-value ratio was too high, or because your home was worth less than you assumed — that declined application lands on your credit reference report. And it stays there for five years.
Every future lender who looks at your file will see that you applied for finance and were declined. It reduces your credit score and it affects your ability to borrow down the track. One rushed application built on a guess can damage your borrowing position for half a decade.
That’s why the free, no-risk first step — getting an agent in to tell you where you really sit matters so much.
A Real Example: The Client Who Called Too Late
Late last year, a client called me in — but only after it was already too late.
They’d applied for additional finance to help their business. The valuation on their property came back lower than they expected. At the same time, their business had hit a downturn, which reduced their borrowing capacity. The low valuation pushed them to a 97% loan-to- value ratio, and the bank ended up asking them to pay down part of the loan.
That’s when they called me — to see what could be done about the low valuation.
Unfortunately, by that point there was almost nothing I could do. Once a licensed valuation is completed, it is extremely difficult to get the number changed. In my entire career, I think I’ve only ever managed to get a valuation revised twice. Once it’s done, it’s effectively fina — as far as both the valuation company and the bank are concerned.
Here’s the thing that still bothers me about that case: if they’d called me BEFORE they put in the application and triggered the licensed valuation, we could have sat down and talked through their circumstances and the real value of the property. Given the business downturn and the tight numbers, the best advice might well have been not to approach that bank at all, and to look at an alternative instead.
That’s the real value of a pre-application conversation. It’s not just about getting a number. It’s about working out whether you should even be making the application in the first place — before it hits your credit file, before the valuation locks in, before the bank can demand a paydown.
What a Proper Pre-Refinance Appraisal Actually Involves
When I come out to appraise a property before a refinance, you should expect a full appraisal pack — genuine knowledge of the suburb, recent comparable sales, and what’s currently on the market. You should also get practical advice on simple things you can do to improve your position.
And here’s a tip that costs you nothing: declutter and give the house a good clean before the valuer comes out.
It sounds trivial, but it genuinely matters. The licensed valuer is a human being. If they walk into a property that’s a mess and poorly kept, they note it in their system, and it affects the figure. Why? Because they’re assessing whether the property is in a sellable state on the day they look at it — remember, they’re thinking about whether the bank could sell it if you defaulted. A property that presents poorly gets marked down.
One more honest point: it’s handy to give the valuer what your local agent has appraised the property at — and they’ll record it on the valuation form. But understand the valuer can only go off the sales evidence they produce themselves. They legally cannot be influenced by outside parties. So the agent figure is useful context, not leverage.
The Biggest Misconception: Trusting the Online Number
The most common mistake I see is homeowners building their refinance plans around an online valuation.
They go to a home open or two, browse a few comparable properties online, or run their address through an automated valuation system. The AVM tells them their property is worth $1.2 million. Then the licensed valuation comes in at $900,000 — and their whole plan falls apart.
The gap exists because automated systems can’t see the things that actually drive your home’s value: whether the property is connected to scheme water, whether it’s subdividable, whether it has valley views, Hills views, or a city outlook, whether the block slopes or is level, whether it has side access for a workshop, a swimming pool, reverse-cycle ducted air-conditioning, or built-in robes. All of these make a marked difference to price, and none of them appear in the algorithm.
I’ve written a whole separate article on exactly how unreliable online valuations can be and why — it’s worth a read if you want to understand the detail before you refinance.
The danger in a refinance is specific: if you build your borrowing plan around an inflated online figure, you’ll assume you have more equity than you actually do. Then the real valuation comes in lower, your LVR is higher than expected, and you’re staring down the credit-file and loan-paydown problems we’ve already talked about.
Things to Be Careful About Before You Refinance
The advice above applies no matter why you’re refinancing. But there are some specific traps worth knowing about.
Watch your loan-to-value ratio and stress-test it. Don’t borrow to a level that only works at today’s interest rates. Ask yourself: if rates went up half a percent or one percent, could you still cover the repayments? Borrow with that headroom in mind.
Be careful rolling short-term debt into your mortgage. Consolidating loans into one repayment can be a good move — but only if you’re disciplined and don’t go out and buy more toys with the freed-up cash. And think about the timeframe. A boat, caravan, car or motorbike would normally be financed over four or five years. Roll it into your mortgage and you could be paying it off over the 20 years left on your home loan — paying interest the whole time. That adds up to far more than you’d expect. Have a play with the mortgage calculator on our website to see exactly what adding that debt does to your repayments and total interest.
Think hard about extending your loan term. People often refinance a mortgage with 15 years left back out to 25 or 30 years. It can substantially reduce your monthly repayments — but it also adds an enormous amount of interest and years to the day you finally own your home outright. It’s a genuine trade-off. Talk it through properly with a finance broker or your bank.
Choose your broker carefully. Just like real estate, there are good brokers and bad brokers. Some will write you a new loan as fast as they can blink, because they earn a substantial commission on every loan written — and some will come back every two or three years to refinance you again for another commission. Plenty of brokers would never do this, and I know some excellent ones. Just be aware it happens. Sadly, I sometimes see the end result: a client calls me because they’ve been put in a position where they now have to sell before the bank repossesses.
Be especially careful in a separation. I’ve seen couples split amicably, agree to a 50-50 division based on an online valuation, and get badly caught out. A year later, the person who kept the house goes to sell and finds it’s worth less than the figure used in the settlement — or the person who moved out discovers the home sold for $150,000 to $200,000 more than they were paid out against. By then it’s too late. In any separation, get a proper licensed valuation and proper legal advice — don’t divide your biggest asset based on a computer estimate.
Your Step-by-Step Roadmap
If you’re thinking about refinancing, here’s the sequence I’d recommend:
1. Get clear on why you’re refinancing and whether it genuinely improves your position 2. Understand the true long-term cost — use a mortgage calculator to model the real impact
3. Get an agent appraisal so you know your actual value before you commit to anything
4. Talk to a good finance broker or your bank about your options
5. Then, and only then, submit your application — with realistic numbers and no nasty surprises
Don’t rush. Don’t over-borrow. And don’t let anyone push you into a loan that benefits them more than it benefits you.
The Bottom Line
For simplicity’s sake, your first port of call should be to get an agent in — just so you get a lie of the land before you make any decisions. It costs you nothing.
That one free conversation can tell you whether your refinance plan is realistic, protect you from an application that damages your credit file, and stop you from making a decision you can’t undo.
Thinking About Refinancing? Let’s Talk First.
If you’re considering refinancing and you want an honest read on what your property is genuinely worth in today’s market — give us a call, send an email, or drop a text.
We’ll come out, have a look, and give you a clear picture before you make any decisions. No pressure, no obligation. It doesn’t matter if you’re refinancing next month, next year, or just weighing it up — that’s what we’re here for.
Brendan Leahy, Naked Real Estate
08 6254 6333
brendan@nakedrealestate.com.au
Unit 1/198 Brookton Highway,
Kelmscott WA 6111
Truth. Strategy. Sold.
Disclaimer: Brendan Leahy and Naked Real Estate are not licensed valuers, mortgage brokers, or financial advisors. This article is general information based on experience in the local property market, not financial or legal advice. Always speak to your finance broker, lender, accountant, or solicitor before making refinancing decisions.