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Mortgage Lending Value


Mortgage lending value (MLV) is according to the International Valuation Standards (sixth edition), the long-term value of the property over the term of the loan, as determined by a prudent assessment of its future marketability by an independent valuer. 

As the IVS point out, such an assessment of the property’s future marketability must take into account the long-term sustainable features of the property, the normal (a term very difficult to interpret over a long-term period in our opinion) and local market conditions (again very difficult to determine for a period of 15 to 40 years, which is the typical span of the term of mortgage loans, based on today’s local market conditions and the limited foresight of one to two years ahead they can provide). Furthermore, the current use and the alternative appropriate uses in which the property can be developed or converted to, should also be considered in assessing its future long-term marketability and value.

Obviously, the mortgage lender needs the property’s mortgage lending value in order to determine the maximum loan amount that can be provided, given the bank’s maximum allowable Loan-to-Value (LTV) ratio and minimum Debt Coverage Ratio (DCR).

Within this context, it is more likely that such valuations will tend to be on the conservative side. However, in periods of rapid increases in property values, there may be some inherent difficulty for adopting very conservative assumptions with respect to future property value growth rates.

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