What is a Home Appraisal and Why Do You Need It?
When you are looking to buy a home, one of the procedures that you will go through is a home appraisal. The appraisal is unavoidable and part and parcel of buying a property. Hence, it is crucial you understand what a home appraisal is and why you should get it done before you Apply for a Home Loan.
Understanding Home Appraisal
A home appraisal refers to monetary valuation of a residential property. People mistake it for a home inspection, which checks the condition of the property, such as the foundation, roof, wiring, plumbing and other elements of the property.
A person will request a home inspection when selling or buying a property, and a qualified professional inspects the property and presents the report highlighting problematic or faulty elements. An inspection does not deal with the financial side of the property. That area is where the appraisal comes in.
The appraisal provides the lender with the fair market value of the property so that they know the borrower is not overpaying. It is in the interest of the lender to get an appraisal done, as the borrower should have the capacity to repay the Housing Loan along with interest.
Financial institutions in India rely on real estate professionals to carry out the home appraisal. It provides peace of mind to all stakeholders that the selling price of the property is correct. Based on this, these institutions approve your Housing Loan amount.
Why You Need a Home Appraisal?
As stated earlier, the lender wants to make sure that you, the borrower, are not over-borrowing, and the property is a sound investment that will allow them to recover the borrowed amount in case you default on your loan. Another reason to get the home appraisal done is to ensure that you are not bluffing the lender, and the home exists and is liveable.
You must get a home appraisal done under the following circumstances:
Selling a Home: If you intend to sell your existing home, getting it appraised will allow you to determine the selling price. The appraiser will check similar properties in the neighbourhood and then compares your property to come up with a value. You can use this value as the listing price for your home when you want to sell it.
Buying a Home: In case you want to buy a home, the bank will require a professional home appraisal to give the final approval for the Housing Loan. It also gives you peace of mind knowing that the price you have agreed upon is reasonable. Always make sure you agree with the seller that the sale price will be contingent on the appraisal.
Loan Against Property: Loan Against Property (LAP) allows you to tap the equity that you have build in your property and use it as collateral to get a loan. You can use the loan amount to start a business, pay for your child’s higher education or wedding, or renovate your home. Getting your house appraised allows you to figure out how much LAP you can apply for, but ensure that the amount is within the limits that the lending institution imposes on such loans.
Business Loan: If you are an entrepreneur and own a home, you can use it as collateral to get secured Business Loan from a reputable lender. Since it will be a secured loan, you can get an attractive interest rate. An appraisal is another reason to assess the fair market value of your property and ensure you can accordingly Apply for the Business Loan.
An appraisal is essential in these cases, but it is equally important to find the right lender so that you get Housing Loan or Loan Against Property at attractive interest rates and terms and conditions. Thankfully, you can always rely on the financial experts at MyMoneyMantra to help you out. They will ascertain your requirement and help you get access to the right lenders so that you can apply for a Home Loan without worries.
Also Read: 8 Unique Renovation Ideas for Your Home
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