When you purchased your home, you had to order an appraisal to get an assessment of how much the property was truly worth. That’s because a home appraisal provides a non-biased, third-party assessment of a home’s true value, which gives a bank an accurate representation of how much to lend homeowners to purchase a home.
But did you know there are other reasons to get an appraisal aside from buying or selling your home? From securing a lower mortgage rate to funding a business, read on for six reasons to order an updated home appraisal.
Reason #1: If You’re Refinancing
When you refinance your home, you’re actually taking out a new loan in place of your existing mortgage. Because of this, an appraisal to secure a refinanced loan is required, and can actually benefit you.
If your home value has changed since you bought it, due to increased costs of living and home values in your area, or if you’ve renovated and made equity-boosting improvements to your home, an appraisal can actually help you land a better rate on your newly refinanced mortgage.
Reason #2: If You’re Getting Divorced
For homeowners splitting assets during a divorce, a home appraisal helps ensure the value of the co-owned home is split evenly between the two parties. If one party plans to stay in the house, an appraisal helps divorce lawyers accurately assess how much that party owes the other. If both parties agree to sell the home, the appraisal can make it easier to settle on a listing price.
Reason #3: If You’re Starting a Business
If you’ve decided to start a business, you may need to take out a business loan to help fund startup expenses. In doing so, you may need to provide certified value for your home to use as collateral against the loan. By completing an updated home appraisal, you may be able to secure a larger amount of financing based on your home’s value.
Reason #4: If You’re Appealing a Tax Assessment
If housing prices in your area have declined since you purchased your home, the value of your home listed on your property tax could be too high. An updated appraisal can help reevaluate the value of your home, which can ultimately lower your property tax.
However, as Nationwide advises, the process for challenging a property tax assessment can vary by state, so be sure to check whether your state or locality allows homeowners to submit their own appraisals when appealing property tax assessments.
Reason #5: If You’re Filing for Bankruptcy
If you’re a homeowner filing for bankruptcy, a home appraisal may be the single most important thing you do. That’s because, when you file for bankruptcy, you are seeking total liquidation of your assets, including your home. By getting a bankruptcy home appraisal, the value declared will determine whether or not you get to keep your home, or have to sell it to repay your mortgage to your lender.
Reason #6: If You’re Looking to Get Rid of PMI
If you put down less than 20% for a down payment when you purchased your home, you may have had to take out private mortgage insurance (PMI) on top of your mortgage.
However, as Bankrate explains, “in a hot real estate market, your home equity could reach 20
percent ahead of the loan payment schedule.” In this case, by ordering a new appraisal on your home, you could ask for your PMI to be canceled so long as you’ve owned your home for at least five years, and your loan balance is not greater than 80% of the new home’s valuation.
Finally, remember that the overall appearance of your property has a major influence on an appraiser. Ensure your home is in tip-top shape, including a well-maintained lawn, decluttered interior, and even a fresh coat of paint to spruce up your home’s aesthetic before the appraiser arrives. By doing so, you could be adding instant value to your home, which only helps you reach your financial goals faster.