Answer
Bank Valuation vs Purchase Price
When the bank says your property is worth less than what you're paying — and what that means for your cash.
Answer: Bank loans are based on the lower of the purchase price or bank valuation. If the bank values a property at $950,000 but you buy at $1,000,000, you must cover the $50,000 gap in cash. This is called Cash Over Valuation (COV). CPF cannot be used for COV. The bank will only lend up to 75% of its own valuation (for first property, LTV 75%), not the purchase price.
How Bank Valuation Affects Your Loan
When you apply for a mortgage, the bank sends an independent valuer to assess the property. The bank then uses the lower of the purchase price or their valuation as the basis for your loan.
This means if the bank values the property lower than what you agreed to pay, you need more cash upfront.
COV Calculation Example
Scenario: SC buying first condo, bank loan at 75% LTV
| Item | No COV | With COV |
|---|---|---|
| Purchase price | $1,000,000 | $1,000,000 |
| Bank valuation | $1,000,000 | $950,000 |
| COV (price − valuation) | $0 | $50,000 |
| Max loan (75% of valuation) | $750,000 | $712,500 |
| Down payment (25% of valuation) | $250,000 | $237,500 |
| Total cash + CPF needed | $250,000 | $287,500 |
| Of which: must be cash (COV + 5% cash down) | $50,000 | $97,500 |
5% cash down payment is on the valuation amount ($47,500). COV ($50,000) is 100% cash. Total minimum cash: $97,500 vs $50,000 without COV.
Where Every Dollar Comes From
$1,000,000 purchase with $950,000 bank valuation
| Component | Amount | Source |
|---|---|---|
| Bank loan (75% of $950K) | $712,500 | Bank |
| CPF OA (20% of $950K) | $190,000 | CPF |
| Cash down (5% of $950K) | $47,500 | Cash |
| COV (price − valuation) | $50,000 | Cash only |
| Total | $1,000,000 |
How Banks Determine Valuation
Banks appoint independent valuers (not the bank themselves) who consider:
- Comparable transactions — recent sales of similar units in the same or nearby condos
- Unit specifics — floor level, facing, condition, renovations (usually not fully valued)
- Remaining lease — especially important for leasehold properties under 60 years
- Market conditions — valuers may be conservative in uncertain markets
- Location and amenities — MRT proximity, schools, upcoming developments
Important: different banks may give different valuations. It is common and acceptable to check with multiple banks.
What to Do If Valuation Falls Short
| Option | How | Best When |
|---|---|---|
| Negotiate the price down | Show the seller the valuation report. Ask to meet at or near valuation. | Seller is motivated, market is soft |
| Try another bank | Different banks use different valuers. Valuations can vary by 3–5%. | You believe the property is fairly priced |
| Pay the COV in cash | Accept the shortfall and cover it from savings. | COV is small, you really want the unit |
| Walk away | If within option period, forfeit the option fee (1% for private, $1K for HDB OTP). | COV is large, deal no longer makes sense |
Negotiation Tips When Valuation Is Low
- Get your valuation early. Before exercising the OTP, get an indicative valuation from your bank. Some banks offer free desktop valuations.
- Share the valuation with the seller. A formal valuation report is evidence that the price may be above market. Reasonable sellers will consider adjusting.
- Split the difference. If the COV is $50K, propose meeting halfway — seller drops $25K, you absorb $25K. Both sides compromise.
- Factor COV into your offer. If you know the market is running hot, build potential COV into your initial offer price.
Know your numbers before you commit
Calculate your maximum loan, monthly repayment, and total cash needed — including potential COV scenarios.
FAQ
What is Cash Over Valuation (COV)?
Cash Over Valuation (COV) is the difference between the purchase price and the bank's valuation of the property. If you buy at $1,050,000 but the bank values it at $1,000,000, the COV is $50,000. You must pay this $50,000 in cash — CPF cannot be used for the COV portion.
Can I use CPF to pay for Cash Over Valuation?
No. CPF OA funds can only be used up to the bank's valuation or purchase price, whichever is lower. The COV portion must be paid entirely in cash. This is a common surprise for first-time buyers.
How do banks determine property valuation?
Banks engage independent valuers who assess the property based on: recent comparable transactions in the area, property condition, floor level, facing, remaining lease, and general market conditions. The valuation is the bank's estimate of the property's market value — it may differ from the seller's asking price.
What should I do if the bank valuation is lower than the purchase price?
You have several options: (1) Negotiate with the seller to lower the price to match valuation, (2) Get valuations from other banks — valuations can vary, (3) Pay the COV in cash if you have the funds, (4) Walk away if you're still within the option period. Many buyers choose to negotiate first.
Is COV common for HDB resale flats?
COV was very common for HDB flats in the past but has decreased since HDB moved to a valuation-first system in 2014. For private property (condos and landed), COV situations still occur regularly, especially in hot markets or for properties with unique features the valuer may not fully account for.
Related
- Mortgage Calculator — monthly repayment for any loan amount
- Affordability Calculator — max condo from your HDB equity
- HDB Valuation vs Purchase Price — the HDB-specific version
- Minimum Cash Down Payment for Condo
- What Is an Option to Purchase (OTP)?
Last updated Feb 2026. LTV limits: 75% for first property (bank loan, tenure ≤ 30 years). CPF usage subject to Valuation Limit. This is general information, not financial advice.