The mortgage lending value is the value of a property that serves a bank as a permanently secure basis for granting credit over the entire term of a financing. Unlike the market value, which is tied to a specific valuation date, it reflects the sustainably achievable value lower — free from temporary, speculative market fluctuations.
The valuation is carried out in accordance with the requirements of the Pfandbrief Act (§ 16 PfandBG) and the Mortgage Lending Value Regulation (BelWertV). The mortgage lending value is thus the decisive instrument for banking-supervisory lending and forms the basis for the lending limit and the loan volume.
"The mortgage lending value must not exceed the value that results from a prudent assessment of the future marketability of a property, taking into account the long-term, sustainable characteristics of the property."
— Section 16 (2) Pfandbrief Act (PfandBG)
What makes an appraisal report bank-compliant?
- Valuation strictly in accordance with BelWertV and § 16 PfandBG
- Sustainable income and cost value instead of a snapshot
- Consideration of safety discounts and capitalisation rate
- Personal inspection and condition assessment
- Accepted by credit institutions as an external valuation
- Comprehensible derivation for the credit file
The mortgage lending value is a distinct concept of value and regularly falls below market value. How the latter is determined is set out on the page for the market value report.
The income side of the valuation follows the rules of the Income approach.
What your bank expects from the report
Credit institutions examine an external report on three points above all: whether the valuer meets the requirements of section 7 BelWertV as to independence and qualification, whether the derivation under section 5 BelWertV sets out all value-determining circumstances in a verifiable manner, and whether the parameters applied fall within the limits of the regulation — in particular the minimum capitalisation rates and the allowances for operating costs.
In practice the decisive factor is verifiability for the credit file: the report must be capable of being reviewed by a third party who does not know the property. That is precisely where valuations fail which are correct in substance but inadequately documented.
When a simplified valuation is sufficient
Not every financing requires a full report. For residential properties, a simplified valuation may suffice up to the small loan threshold of section 24 BelWertV — an amount to be secured, including prior charges, of up to EUR 600,000, raised from the previous EUR 400,000 by the 2022 amendment — provided that any commercial share of income does not exceed one third of gross income. Whether your case falls within this is clarified before instruction; where it does, it saves you the cost of a full report.
Fee
The basis is the fee schedule for the market value report; the mortgage lending value report is graduated according to the value determined. The complete fee schedule can be found under the cost of an appraisal.
Methodological principles, the two-pillar approach, minimum rates and the role of the Property Value under CRR III are set out in detail in the article BelWertV: methodology of mortgage lending valuation.
