Should You Get Your Property Appraised Before Refinancing?

If you’re looking to refinance your property, for whatever reason, you should consider getting an appraisal first. With interest rates near record lows, getting an appraisal before refinancing could unlock a huge portion of equity that has built up over time.

Why Do You Need an Appraisal?

There are a lot of reasons why you might want to have your property reappraised. The most common reason for an appraisal is to obtain a loan on a property.

Refinance or Get a New Loan Approved

Why do you need a home appraisal to refinance? The most common reason for an appraisal is to obtain a loan on a property. If you want to consolidate a loan, help with tuition, start major renovations, or just to tap into the home’s equity, you’re going to need a new loan. This often requires a new appraisal on the property.

That’s because you can borrow up to 80% of a home’s appraised value (minus the amount left to pay on your mortgage) when refinancing.

For example, if your home is newly appraised at $500,000 and you have $125,000 left on the mortgage, you can refinance up to $275,000. ($500,000 x 0.8 = $400,000 – $125,000).

Receive a Lower Interest Rate

If your mortgage is coming up for renewal and interest rates have fallen, it might be a good idea to get a home appraisal. A lot of different factors go into what kind of interest rate a lender will charge. This includes the kind of property (single family home, townhouse, apartment, or condo), location, and condition.

Spot a Rising Trend

In addition to real estate agents, professional appraisers should be able to help identify when a market rebounds. A local home appraiser should be knowledgeable about the community in which they conduct their appraisals. As a result, they should be able to spot a rising trend.

Estate Liquidation

A home appraisal in the event of estate liquidation is a great way to establish the fair market value of the property. One of the first steps in liquidating an estate is having an understanding of the property’s true value. This ensures everyone involved in the liquidation knows they are receiving a fair deal.

Selling a Home

Whether you’re selling a home to move up, downsize, or relocate because of a job, a home appraisal can help you determine a selling price. Unlike a real estate agent, a home appraiser has no vested interest in what the home sells for. Seeking a home appraiser can provide the property owner with an objective understanding on what their house is worth and setting a fair selling price.

Other reasons for getting an appraisal include establishing the replacement cost for insurance purposes, to contest high property taxes, or to settle a divorce.

Who Does Home Appraisals?

Home appraisals are performed by professionals who are trained to determine the value of your property. Appraisers operate differently than home inspectors do. Before buying a property, you want the home inspector to determine if any repairs need to be done. That’s why they check the electrical, plumbing, etc.

An appraiser, on the other hand, checks the general condition of your home to come up with a comparable market value. Banks and other lending institutions need to know the market value of your home before they could loan money on the property.

Canadian home prices rose to a record high in June; the sixth consecutive monthly increase. The increase was led by housing prices in Vancouver (8.5%) and Toronto (7.8%). Outside of these two markets, the average Canadian housing price increased by less than two percent.1

Regardless of where you live, with the rising values of Canadian real estate, it’s important to get an appraisal before refinancing your property. That’s because you can borrow up to 80% of a home’s appraised value (minus the amount left to pay on your mortgage) when refinancing.

For example, if your home is newly appraised at $500,000 and you have $125,000 left on the mortgage, you can refinance up to $275,000. ($500,000 x 0.8 = $400,000 – $125,000).

Top 7 Tips to for High-Value Home Appraisals

If you’re getting an appraisal, these tips can help you get the top current market value for your home.

Clean Up

The appraiser is basing the value of your property on how good it looks. Before the appraisal, prepare your home as if you’re selling it. Clean and declutter every room, vacuum, and scrub. Do whatever you can to make your home as presentable as possible.

Make Necessary Repairs

While the appraiser isn’t concerned if your home is in perfect condition, they will factor in anything that requires repairs when it comes to determining your home’s value. Before the appraisal, make sure you take care of any obvious problems. That could mean a leaky faucet or a cracked window. Repainting a room or putting up a new light fixture might not cost much but it could provide a dramatic impact.

Curb Appeal

An appraisal is all about first impressions. And the very first one they get is when they walk up to your property. Spend an hour or two making sure the outside of your home is warm and welcoming. Clean the windows, mow the yard, trim the hedges, or shovel the snow.

Make a List of Upgrades and Features

It’s important that the appraiser is made aware of any updates you’ve made, especially those which are hidden, like new plumbing and electrical. Make a list of what was done, when, and by whom. Additional upgrades could include new floors, bathrooms, kitchen cabinets or counters, decks, etc.

Difference between Home’s Actual and Effective Age

A home appraisal can tell potential homebuyers or the bank the effective age of the home. When people hear a home was built in 1900, they might see the property as a money pit in need of a lot of repairs. If you’ve done renovations and upgrades, you’ve changed the effective age of the home. A home appraisal could show a century home with an effective age of just five to seven years.

Do Your Homework

You know your neighbourhood better than your appraiser does. Find out what similar homes in your neighbourhood are selling for. Your property might look like one down the street, but if you believe the value of your property is worth more, let them know why.

Lock Up Pets

I’m sure most appraisers like pets, but they may not like your cat rubbing against their leg or the dog barking, sniffing, or following them around. Remember, no one is 100% objective, and in-the-way pets shouldn’t impact the value the home appraiser provides, but you never know.

The same goes for homeowners: don’t pester the appraiser with questions and comments while they’re doing their job. Prepare some questions and ask them when they’re finished.

Canadalend.com: The Nation’s Leader in Refinancing

If you’re looking to refinance your mortgage and need to have your property reappraised, contact the independent, licensed professionals at Canadalend.com. Not only will they explain the refinancing process, they will help you get the best rates possible, and suggest professional appraisers in your area.

To see what your refinancing options are, contact Canadalend.com or apply online and a mortgage specialist will help set up an appointment at your earliest convenience.

Sources:

“Teranet House Price Index,” housepriceindex.ca web site; http://www.housepriceindex.ca/