Appraising Your Home to Access Capital for Purchasing an Income Property
How to get the best appraised value possible out of your current home to help you purchase an income property.
Own your own home and thinking about buying another? Excellent idea! Purchasing a secondary property to use as an income property or rental property is a smart investment and is often more possible than you’d think, especially if you have capital or home equity building up in your existing property. A local appraisal company working with a mortgage broker local to Victoria BC, can help you find out if you have enough capital or home equity in your existing property to qualify for a mortgage refinance so you can purchase another property.
Using your existing home’s equity, or increased value, to purchase an income property is something financial advisor and mortgage brokers advise all the time in order to help homeowners get ahead and secure financial freedom into their retirement years. With an income property, you’re allowing tenants to pay down your mortgage for you, and once it’s paid off, you have a property that has increased in value that you can either sell, pass on to your grown children, or downsize into and enjoy yourself.
Owning more than one property is made easy with a simple refinance of your existing mortgage. Mortgage refinancing involves having your existing mortgage re-evaluated so that you can borrow additional funds (access your home equity) from your lender to put towards a second property, or spend however else you’d like. This borrowing of extra money is made possible only if you have enough equity on your first home built up – and that is precisely where a real estate property appraisal company comes in!
Here are 5 things you should know about getting your home appraised to access your home equity.
1. An accurate appraisal of your property’s current market value is essential to the refinancing of a home.
If you’re like most homeowners, you are likely already somewhat aware of your home’s value in the current market. After all, you get annual assessments from BC Assessment, and you may see your neighbours selling their properties for top dollar, or receive letters from hopeful realtors informing you of how much your home is worth.
However, when it comes to something as important as refinancing, you want to make sure your home’s indeed got enough equity to refinance. A property appraisal company can confirm what you already know to be true, and in many cases delight you with an even higher number than you or your lender were thinking possible.
Remember, the cost for a property appraisal is a flat fee – it is NOT calculated as a percentage of your home’s appraised value.
2. The higher your home is appraised for, the more money you can borrow for your income property.
When refinancing, homeowners can borrow up to 80% of their home’s appraised value, minus the amount that is left still owing on their mortgage. For example, if your home’s appraised value is $500,000 and you have $125,000 still owing on the mortgage, you can apply for a refinancing amount up to $275,000. (80% of $500,000 is $400,000, minus the $125,000 still owing). This is $275,000 you can put towards your income property.
3. A home appraisal company comes to see your home in person, which provides a more accurate appraisal for your lender.
Depending on the property, some lenders can tell when a homeowner has equity or not, without even having to step foot on the property. They use an automated system that computes enough of an appraisal for them to deem that you have equity you can access during a mortgage refinance.
However, if you’re looking for a more on the nose appraisal, an on-site visit by a certified real estate property appraisal company is recommended and make a difference of tens of thousands of dollars in your appraisal, and therefore how much capital you can access for your desired income property.
4. There are several things you can do around your existing property to better your chances of a high appraisal.
Again, the more your home is deemed to be worth, the more capital you’ll be able to access to purchase a second property. To get the highest appraised value possible, you might have to work with your appraiser a little bit to make sure they have all the details they need to complete a fair assessment. For example, be sure to point out any renovations, additions, or value-added features to the home. Pointing out these items to the appraiser should be done in addition to Doing These 8 Things to Increase Your Home’s Appraised Value.
5. When you receive an appraisal that was much higher than you expected, you don’t have to borrow the maximum 80%.
As mentioned above, you can borrow up to 80% of your home’s equity to put towards your rental property, but that doesn’t mean you have to take the full 80%. It’s up to you when it comes to what amount to borrow. Take only what you need!
On a similar note, you don’t have to spend the borrowed money right away. When you access your capital and your refinancing is completed successfully, you’ll receive a cheque with the amount of money you’ve decided to borrow, which can be put into a savings account until you are ready to buy that perfect investment property. So, there’s no need to rush into anything, but it can be a nice comfort in knowing you have the highest amount possible ready to go when needed – achieved through a top-notch property appraisal.
Contact D. Fritz Appraisals at 250-413-7319 to book your next appraisal in Victoria, BC. We offer the fastest turnaround time in the region and can often deliver an appraisal within 24 hours. specialize in real estate appraisals for all situations, such mortgage refinancing, new construction, division of assets, and estates.