Appraised value is crucial in loan underwriting and determines how much money may be borrowed and under what terms. For example, the Loan-to-Value (LTV) ratio is based on the appraised value. Buyers with a down payment of at least 5% of the purchase price but less than 20% must be backed by mortgage insurance. This protects the lender in the event the home buyer defaults. These loans are known as "high LTV" or "high ratio" mortgages. In situations where the buyer has 20% or more for a down payment (Conventional Mortgage), the lender or borrower could obtain "low-ratio" insurance that covers 100% of the loan in the event of a default. The Canadian Government typically backs this type of mortgage insurance through the Canada Mortgage and Housing Corporation (CMHC), or your lender may use Sagen (Formally, Genworth Canada). In either case, premiums are paid by the buyer in the interest of the lender. This insurance is not to be confused with mortgage life insurance which protects homeowners and their families from death or illness. The assessed value is the amount the local or provincial government has designated for a specific property and frequently differs from market value or appraisal value. This assessed value is used as the basis of property tax and when a property tax is levied. The assessed value of real property is not necessarily equal to the property's market value.
WHAT IS YOUR HOME WORTH?
The first step in selling your home is knowing the difference between value, worth, and price. Let's examine the determining factors at work. Understanding these factors allows them to be leveraged. There are several ways a home's value is derived.
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