Appraisal Risk

Firm Offer ‐ Risk Assessment I have underwritten your mortgage application, and you meet both the debt service and credit guidelines.  If you decide to remove your condition of financing from your offer to purchase, you will have the following risks to consider:   

 If the property's appraised value comes in lower than the purchase price, you must increase your down payment to cover the difference.  The fewer funds you have available as a buffer, the greater the risk that you won't be able to make up the difference.   

 Appraisers rely heavily on recent comparable sales in the immediate area when estimating a property's value. The fewer comparable properties there are, the more subjective the appraiser's job becomes, especially if your subject property is remote, or unique.   

 If you are making a substantial down payment on your property, then the appraisal condition presents only the limited risk that you may be required to pay for high‐ratio loan insurance if the value is adjusted downwards.   

 If you are only making a small down payment with limited additional resources, the risk in waiving your financing condition before the lender has signed off on the appraisal increases as room for adjustment is smaller.   

 There is also the risk that an appraiser flags a specific issue with the property, such as the presence of knob & tube wiring, lnsulbrick, disturbed asbestos, UFFI or other materials the lender deems unacceptable.  In such cases, the lender may still be willing to proceed on the condition that a portion of the mortgage funds be held back until the borrower provides confirmation that issues have been addressed. Once the necessary repairs are made, the lender then releases the held back funds.   While waiving your financing condition before having a fully qualified commitment from your lender is a fairly common practice at the time being for the GTA, you are taking a significant risk when you do this.   The bottom line is; the less financial flexibility you have, the more important the financing condition becomes. 

Lindsay Doke  416 464 6423 

MountainView Mortgage Brokers

The Bank of Mom and Dad

Mortgage Tip of the Day:

This one is very clever and it came to me from a client.

A client was getting a gift from their parents for part of the down payment on their new home. This clever person took the gift and contributed to their RRSP. Then they withdrew the funds without penalty (first time buyer) and used the gift for the down payment as it was intended! 

By doing this they got the tax benefit on their income tax AND they have made a commitment to contribute the funds back to the RRSP for the next 15 years! 

Smart smart smart! 

I am now going to promote this plan every time I have first time buyer getting a gift. (Did I mention my client's mom is a financial planner?)

Thank you Marcy Berg! 

http://renewyourmortgage.ca 

You should be using every TIP you can to maximize your equity.
Call today!   647 218 2414