How does property valuation work and why does it matter for my loan?
Property valuation determines the current market value of a property, and your loan amount is based on the lower of the purchase price or the valuation. If the valuation falls below the purchase price, you must fund the difference from your own cash resources on top of your standard downpayment. For HDB resale flats, any amount paid above HDB's valuation (COV) must be paid entirely in cash.
Last updated: 22 Apr 2026
Property valuation is the process by which a licensed appraiser determines the current market value of a property. It plays a crucial role in the mortgage process because the loan amount is calculated based on the lower of the purchase price or the valuation - not the purchase price alone.
When you apply for a mortgage, the bank commissions a valuation from an approved panel of valuers. The valuer assesses the property's market value based on comparable transactions, condition, location, size, tenure, and other relevant factors.
If the valuation matches or exceeds the purchase price, the loan is calculated on the purchase price and there are no complications. If the valuation falls below the purchase price - known as a valuation gap - the loan is calculated on the lower figure. You are required to fund the difference between the valuation and the purchase price from your own resources, in addition to the standard downpayment.
For example, if you are purchasing a condominium for S$1,200,000 but the bank's valuation comes in at S$1,150,000, the maximum loan at 75% LTV is S$862,500 - calculated on the valuation, not the purchase price. You would need to cover the S$37,500 gap in cash on top of your standard downpayment.
Valuation gaps are more common in heated markets where buyers bid above what comparable data supports, or for unique properties with few direct comparables. They can also occur when market conditions soften between the time an offer is made and the valuation is conducted.
For HDB resale flats, HDB conducts its own valuation as part of the resale application process. Any amount paid above the HDB valuation - known as Cash Over Valuation or COV - must be funded entirely in cash and cannot be covered by CPF or loan proceeds.
Understanding the valuation process helps you negotiate more carefully and avoid overcommitting. Cashew's advisors can provide market insights to help you assess whether a property is likely to be valued at or near your intended purchase price.