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Order Appraisal Report Call 416-282-4111 Sat Apr 29th, 2017

BUYER APPRAISAL

Home Buyers, Why do you need a Real Estate Appraisal?
How much does it cost if you overpay for that home or condo?
Could there be a problem when one pays the top price in a market?


Could there be a problem when one pays the top price in a market?

Lets take the Jones's, they just purchased a condo for $210,000 in a hot market.  Because they were in a bidding war, they paid about $10,000 more than what similar condos were selling for, hence $10,000 over market value.  They were banking on putting 25% down ($52,500)and getting a 75% mortgage ($157,500).

The appraiser does not create value or guess at value, he does a market analysis on facts.  The interpreted facts tell the appraiser that other condos similar to the one the Jone's bought have sold for and have a market value of $200,000. 

Mortgage companies, banks and other financial institutions in Canada lend up to 75% of the lesser of the sale price or appraised value.  Since the value based on sales facts was $200,000 then the maximum uninsured conventional  mortgage is $150,000.  Now the Jones have two options:

a) increase the down payment from $52,500 to $60,000, or

b) obtain an insured high ratio mortgage of $157,500 which has a loan to value ratio of 78.8% (157,500 divided by 200,000) and pay additional insurance premium costs. With a 78.8% loan to value ratio the loan premium cost would be $1,177.50 ($157,500 x 0.75%). This premium cost of $1,177.50 plus interest will be rolled into the mortgage.  Therefore the cost of borrowing an extra $7,500 is $1,177.50 plus interest over the life of the mortgage.  WHEW!  That's a hefty cost! 
 
Insured high ratio mortgages
Sample Table of Insurance Premiums
Loan to value ratio Premium
Up to and including 65% 0.50%
Up to and including 75% 0.75%
Up to and including 80% 1.25%
Up to and including 85% 2.00%
Up to and including 90% 2.50%
Up to and including 95% 3.75%

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INHOUSE APPRAISAL CORPORATION
Box 6107, Station "A", Toronto, Ontario, Canada   M5W 1P5
33 Ivan Road, Toronto, Ontario, Canada   M1C 1V1
Phone 416-282-4111                       Fax 416-282-7353
REAL ESTATE APPRAISERS AND CONSULTANTS
Info@ihac.com,

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