Why Are Appraisals Needed For Home Equity Loans
Is no appraisal for getting a home equity loan possible? Find out by reading this blog.
Ordering an appraisal is a common step when applying for a mortgage, and even when getting a home equity loan. Appraisals are necessary when homes are being bought or sold, or when people refinance or take out a 2nd mortgage on their home or another piece of real estate.
An appraisal helps the parties involved in the transaction determine the current market value of the home and the property’s condition. In turn, these factors help determine its loan to value and marketability.
Home Equity Loan Appraisal Process
When looking to obtain a home equity loan or 2nd mortgage, appraisals are generally required to determine value. However, if you have a high level of home equity, you can go with no appraisal as this can be waived in lieu of an inspection or walk-through. This is only in the case of private mortgage lenders and not of conventional lenders like banks.
Generally, the 2nd mortgage’s loan to value has to be lower than 65% LTV. Moreover, the property should be located in a major metropolitan area like Vancouver BC or any other city in Metro Vancouver, Victoria BC, Kelowna BC and/or close to the investor or their representative.
Option #1 – Obtaining a Quote With Specific Conditions
In some cases, mortgage brokers can obtain a quote laying out specific conditions as well as being subject to an appraisal.
- Approved mortgage amount
- Approved interest rate
- Approved payment
- Approved fees — i.e., broker, lender, application, etc.
- Loose leverage to negotiate rate, fees, terms
- Contracts are subject to value and committee approval. This gives lenders an out if they see something in the report they do not like
- Unforeseen issues with the property that is brought to light after an inspection
- Limited lenders offer quotes subject to reviewing the entire application — including the appraisal report.
The appraisal is now in the lender’s name and can represent a red flag to other lenders that someone else has turned this application down.
Option #2 – Getting Estimates From Your Mortgage Broker
A mortgage broker can give you an estimate of rate fees, terms and whether you have the option to go no appraisal when trying to get a home equity loan.
Ordering an appraisal prior to presenting the application to lenders is usually a better way of keeping control of your information. It also helps mitigate any surprises that might come up in the appraisal report and offers leverage to better terms in the mortgage offer.
- Allows a mortgage broker to structure the application to best suit the borrower
- Enables a mortgage broker to negotiate better terms
- Keeps options open for the negotiation of the lowest rate possible
- Allows a mortgage broker to switch to a new lender if the one they are negotiating with is not willing to work in the client’s best interests.
- Peace of mind knowing exactly what you are qualified for, subject to an appraisal
- Some lenders have a limited approved appraisal list
If you need more information on an appraisal or no appraisal needed for a home equity loan, or are looking for a mortgage at a great rate and the best terms for you, feel free to call us today. We are BC’s top experts in what we do, and it shows.
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