Underground Journal

Assessing Your Properties Value

One of the most important things you should do before attempting to get a second mortgage is to have a very clear idea exactly how much your property is worth. This will determine how much money a bank will be willing to loan you, and is one of the factors in determining your interest rate. This will mean going through the process of getting an appraisal for your property. Most lenders will require that an appraiser of their choice do the assessment in order to ensure the objectivity of the results.  Keep in mind there are fees associated with getting an appraisal.   Some banks are willing to accept a market evaluation from a real estate broker and this would save some money on fees.  There are some indicators that should give you an idea of how much your property is worth.  First of all, the longer you live or own the property, the higher the chance that its value has gone up. Any home improvements, such as renovations or expansions done since the original mortgage, should count as additional equity for your loan application.

For example, let’s say that your original mortgage was valued at $150,000. After owning the property for some years, its value has increased to $200,000. Let’s say that you have equity of $75,000 in your first mortgage, added to the $50,000 increase in value, you should, in theory, be eligible for a fully secured second mortgage worth approximately 90% of $125,000.  Up until the downturn in the economy you could even get the 100% or more of the value.  Those days are gone for now but they may return in time.  Remember that the more equity you have in your first mortgage, and the higher the increase in your property’s value, the lower your interest rate. This is why it is always a good idea to take care of your properties. There are some unfortunate cases where the value of a property has either remained the same or actually gone down since the original purchase. In cases like these, you may have to be content with borrowing an amount equal to just the equity you have in your first mortgage, or risk a higher interest rate by negotiating for more.

Search around for a good mortgage specialist to help you find the best lender if you’re not sure where you stand.

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