The role of a home appraisal in the mortgage process
A home appraisal is an important part of the mortgage process in Ontario, as it provides an independent assessment of the value of the property. The appraisal is typically carried out by a licensed appraiser, who will visit the property and evaluate its condition, location, and other factors that can influence its value.
The appraisal is important for several reasons:
Determines the maximum loan amount: Lenders use the appraised value of the property to determine the maximum amount they are willing to lend. This is because lenders want to ensure that they are not lending more than the property is worth, as the property serves as collateral for the loan.
Protects the lender: The appraisal helps to protect the lender from losses in the event of default. If the borrower defaults on the loan, the lender can sell the property to recover the amount owing. The appraisal helps to ensure that the lender is able to recover their costs in the event of a foreclosure.
Protects the borrower: The appraisal can also be beneficial to the borrower, as it provides an independent assessment of the value of the property. If the appraisal comes in lower than the purchase price, the borrower may be able to negotiate a lower purchase price or may need to come up with a larger down payment.
It's important to note that the borrower is typically responsible for the cost of the appraisal, which can range from a few hundred to a few thousand dollars depending on the location and complexity of the property. However, the cost is often built into the closing costs of the mortgage, and can be offset by the savings of negotiating a lower purchase price or securing a lower interest rate.
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