Bank valuation below the price: avoid a mortgage shortfall

A bank valuation below the agreed price does not automatically mean the home is a bad purchase. But it changes the calculation that matters to the lender.

In a Portuguese mortgage, the financing limit does not look only at the price you agreed with the seller. The bank calculates the LTV ratio on the lower of the acquisition price and the valuation. If the valuation is lower, you may need more cash to complete.

Why a low valuation changes the loan

When you hear "financing up to 90%", read the sentence carefully. For an own permanent home, that limit applies to the lower of the purchase price and the bank valuation. For other purposes, the limit may be lower.

This means the bank may decide that the collateral is worth less than the price you negotiated. Even if your income is acceptable, the financed amount may fall because the property value is lower than expected.

A quick example of the gap

Imagine a purchase for 300,000 euros for an own permanent home. If the bank finances up to 90% and the valuation is also 300,000 euros, the theoretical maximum loan would be 270,000 euros.

But if the bank valuation is 270,000 euros, the 90% limit is calculated on 270,000 euros. The theoretical maximum loan falls to 243,000 euros. The difference does not disappear: it must come from own funds, a price renegotiation, another bank or another solution accepted by the parties.

Where the valuation fits in the process

Confusion happens because the mortgage has several stages. A simulation or pre-approval mainly looks at income, debts, term, age and risk profile. Final approval includes the specific property, documents, valuation and bank policy.

In practice, the risk often appears in this sequence:

If the valuation only happens after the CPCV, the contract should already cover that risk. If the seller refuses a financing condition, the buyer should know they are taking more deposit risk.

What to confirm before signing the CPCV

Before promising to buy, ask the bank or broker for concrete timing: when the valuation will be requested, how long it usually takes, which property documents are still missing and the minimum valuation needed to keep the required loan.

Then run a conservative calculation. Do not rely only on the best-case scenario. Calculate how much cash you need if the valuation comes below the price.

The clause should not be vague. It should state that approval is required, by which date, for what minimum amount, under what conditions, and what proof must be provided if the bank refuses or reduces financing because of the valuation.

What to do if the valuation is low

First, request the report and check for objective errors: area, typology, condition, annexes, parking, location or documents considered. If there is an error, ask the bank how to challenge it or request a new valuation.

Then separate real options from hope.

The worst scenario is discovering the issue near completion, with no time for a new bank, no extra cash and no exit clause. Treat the bank valuation as a purchase condition, not as paperwork.

Next step

Before the CPCV, ask for the numbers in writing: price, minimum valuation needed, target loan, own funds and timing to final FINE. If the margin is tight, treat the valuation clause as essential.