With the maximum loan to value for refis reduced to 80 per cent, banks may be adding insult to injury with more conservative appraisals for refis, argue brokers.
According to Andre Semeniuk, a mortgage planner with Mortgage Architects, appraisers are now more conservative when it comes to refinancing than purchasing.
“The major issues with appraisals are with clients that are refinancing and repositioning debt to consolidate,” he said. “Appraisers understand that because there’s no one waiting to sell the house there won’t be the same aggravation of coming in low on an appraisal on a refinance that there is on a purchase.”
Semeniuk said banks on appraisal alert in anticipation of a slowdown are creating the slowdown themselves. He has noticed appraisals differ by as much as 25 per cent.
“Those homeowners who have high unsecured credit card debt that are trying to reposition themselves for the long term are finding they’re not able to do that,” he said. “Not being able to use or select experienced appraisers may also have an effect on the economy because those people who have high interest, monthly compounded high-interestdebt really do not have the ability to reposition that debt to a more affordable standpoint .”
Brokers are reporting that companies are on appraisal alert since last month’s mortgage rule announcement and more conservative appraisals may be driving the very slowdown appraisers are anticipating.
“We understand appraisers are there to do their job and we don’t want to prevent them from doing that but unfortunately appraisals are fairly subjective and that has created concern. There’s an extreme amount of inconsistency in the market,” Semeniuk said.