Appraisals for Second Mortgages

Tapping into the equity in your home when you need cash can be a smart move. It offers potential tax savings, and second mortgage rates may well be lower than credit card interest rates. If you're thinking about borrowing against your home's equity, you should know how much equity you have to borrow against.

Your friendly realtor may be able to give you a market value for your home, and you may even know the amount that your neighbor sold his house for last year. Unfortunately, a lender isn't going to accept either of those figures. He's going to want an appraisal.

Understanding appraisals

An appraisal is different from a home inspection. It won't tell you whether all the wall sockets are working, or whether the chimney is sound. It will, however, give a professional estimate of your home's market value.

The appraiser will look at your property and check sales figures for other homes in the same area. He will then adjust for differences between the homes. After a thorough examination, he will deliver an estimate of your home's current value.

The final report will include information on the home's flaws, such as a crumbling foundation, and a list of issues that might be dragging down the value of the home, such as poor street access.

What you'll pay

The price of an appraisal varies from market to market and is affected by the size and complexity of the job. A home with a guesthouse and a studio over the garage will cost more to have appraised than a standard three-bedroom, two-bath home. Count on spending at least several hundred dollars, no matter what type of place you call home.

Finding an appraiser

Ask friends, relatives and coworkers for recommendations. You can also go online, where there are several directories of property appraisers.

By knowing how much your home is worth in the eyes of a lender, you'll know how much equity is available for you to borrow when you apply for a second mortgage. If you're in need of money, this information can be invaluable.