Mortgages and assessments

Assessment versus mortgage rules

For the past 2 1/2 months the focus has been on upcoming mortgage rule changes, and how these changes will affect clients. 

Last week, the rubber hit the road.

What else happened last week? People across the province opened their mail and found their 2018 property assessments. 

Last fall, BC Assessment sent letters to thousands of homeowners advising that they would be seeing a larger than normal increase in assessed value.  According to a CBC article I read, those letters were issued to people whose assessment were increasing by 30 per cent or more.

I checked mine on the BC Assessment site. I was surprised to see my assessment increased by almost 20 per cent.

My initial response was mixed. Who doesn’t like to see that their home is worth more? However, being as our property tax bills are based on our assessed values, my mind starting calculating a proportionate increase in my property tax bill. 

My first thought was that I needed to appeal my assessment. How on earth could they justify a 20 per cent increase??

I scrolled down the page (at least halfway down), I found a tab marked Sample Sold Properties. By clicking on that tab, I found an extensive list of similar houses that sold in West Kelowna over the last year.

Based on the list of comparable sales, the new assessed value on my home is certainly in the ballpark of what I would list it for if I were planning to sell.

If you are considering appealing your assessment, I suggest you take a minute to look at the Sample Sold Properties tab for your own property. If the houses that come up were sold at prices similar to your assessment, and the homes are similar in size and area to your home, my guess is you won’t be very successful with your appeal.

If your increase seems odd or disproportionate compared to the homes you see listed, your best bet is to pick up the phone and call BC Assessment to discuss your new assessment.

How does this tie in to the mortgage world?

Over the last week, I had conversations every day with clients who called asking if they could now refinance their homes being as their property was worth so much more.

Lenders require appraisals for refinance applications. Appraised value and assessed value are (generally) not the same. Over the last year I saw appraisals on homes come in at well over their assessed value.

For a refinance, the maximum we can take the mortgage to is 80 per cent of the appraised value. When I am working with a client on a refinance, one of my first steps is to check the assessed value to see if we are in the ballpark.

Even if the assessed value seems low, with my knowledge of what homes are selling for, I usually have a sense of whether the value is there to move forward (or not).

The new assessments and lists of comparable sales are a great starting place for determining the true value of homes in the area. Had you asked me the same question based on last year's assessed values, my answer would have been different.

Clients choose to refinance their homes for many different reasons. Whether or not refinancing is a good idea is a highly individualized question, and is a topic for another day.

The next piece of the puzzle is to figure out whether clients qualify to carry a larger mortgage. With the changes that kicked in Jan. 1, clients now qualify for about 20 per cent less than they did previously.

It will be interesting to see how many clients are negatively affected moving forward.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.