In most cases, when you get a mortgage, you will also need to get an appraisal. This is a professional assessment of the property’s value. Lenders often require appraisals before they will give a mortgage on a property because they want to be sure that the property is actually worth what they are lending.
Who does the appraisal?
A professional appraiser in Canada must be licensed by either the Canadian National Association of Real Estate Appraisers or the Appraisal Institute of Canada. Often lenders will have an approved list of appraisal companies that they use. Your mortgage broker will know which companies are on a given lender’s list and choose someone who is local.
What is entailed in an appraisal?
When conducting an appraisal of the property that you wish to buy, the appraiser will look at both the outside and the inside of the home as well as the surrounding property.
The value can be calculated using a direct comparison approach (i.e. comparing similar properties in the area that have been sold recently), the cost approach (how much the land plus the cost to construct a similar home would be) or the income approach (which would be used if you are purchasing the property to generate rental income.
When do I need an appraisal?
Typically, the lender will require an appraisal if you are putting more than a 20% down payment on your home. If you are putting down less than 20%, you will require insurance, so the lender will be less concerned about an appraisal because they are protected by the insurance.
How much is the appraisal and who pays for it?
In most cases, you will have to pay for your own appraisal and the prices is approximately $300 to $500.
Is an appraisal the same thing as a home inspection?
No. Although both the appraiser and the home inspector look at similar things they are not the same. You should never forgo a proper home inspection thinking that it is covered in your home appraisal.
Will an appraisal affect my property taxes?
No. Assessments for property taxes are different than home appraisal assessments?
What if I am unhappy with the amount my home is appraised at?
If you feel that the property was appraised unfairly, you can always have another appraisal to get a second opinion. It will be up to the lender however which one they will use or whether they will use an average of the two.
If you have further questions about home appraisals or would like to discuss applying for a mortgage, then contact Akal Mortgages today.
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