Valuation Fees

In order to satisfy itself that your property is of sufficient value to secure a loan of the amount you're seeking, the bank will typically have the property valued by a professional valuer.

The fee for this service may be included in the application fee, or it may be payable in addition to the application fee. Note, also, that this fee is typically charged for each property being used as security. If multiple properties are securing a loan, a separate valuation fee may be incurred for each one.

Not all lenders will require the secured property to be valued. Some will accept the contract price as the valuation.
Lender's Mortgage Insurance

Lender's Mortgage Insurance (or LMI) protects the lender against loss of capital if you default on your loan and the secured property sells for less than the outstanding loan balance (plus costs). If this happens, the lender will claim the loss from the LMI insurance company, which will in turn take legal action to recover this shortfall from you (the original borrower.)

LMI insurance protects only the lender's interest and not the borrowers. However, the borrower pays the premium.

Clearly the risk of a secured property selling for less than the outstanding loan balance increases with higher loan-to-value ratios (LVR). So the cost of LMI is related to the LVR of the loan. The higher an LVR, the higher the LMI premium as a percent of the loan amount.

If the LVR is less than 80% (e.g. a loan of less than $80,000 on a property valued at $100,000), lender's mortgage insurance is usually not required.

The need for LMI is determined by the property's value (as determined by the banks valuer), and not its selling price. This is often a good argument for property buyers to include a 'subject to finance' or 'subject to valuation' clause in their contracts to allow them to exit the contract if the property's value comes in much lower than purchase price.