Impact of Home Assessments on Mortgage Payments, Part 1

At Altius Mortgage and our partners at Mortgage Ogden, the primary goal for each client is to help you attain a great mortgage rate and loan to help you attain your long-term homeownership goals. We’ve helped numerous Utah buyers not only find the home of their dreams, but qualify for a robust mortgage to cover it in a way that lines up with their future finances.

When it comes to the long-term future of your mortgage, one factor to be aware of is what’s called a home assessment. These are regularly carried out by the town or city you live in, helping determine property values for the purposes of property taxes, homeowners’ insurance and other important fees. Home assessments could have a significant impact on a few areas of your long-term finances – this two-part blog series will go over everything you need to know about these assessments and why they matter.

Escrow Accounts and Mortgage Assessments

In virtually all mortgage loan situations, the mortgage will include an escrow account. This account is designed for money to be set aside as part of the mortgage for property taxes, homeowners’ insurance and other areas that are not directly involved in the principal purchase price of the home.

If and when your home is assessed by a representative of the local government, these are the areas that might be impacted. Even if you have a fixed-rate loan, your payments could change if the assessment of your home places its value far apart from what the previous assessment said. For this reason, it’s important to maintain the quality of various home areas and components even years after your purchase, as this could have a real impact on your mortgage.

Assessment is Different From Appraisal

Those familiar with the appraisal process during a mortgage application and home search may be wondering how assessment is different, and the primary answer lies in the purposes and methods used for each. While the overall theme is the same – evaluating major components of the home to determine its value – this is done very differently and for different reasons.

How Assessment and Appraisal Differ

During an appraisal, the appraiser involved will look at similar homes in the area that have sold recently to get an average selling price. From here, they’ll adjust this number based on the qualities of the home, the number of rooms and other factors. The goal is for the bank to be able to determine whether the amount you’re asking for on a mortgage lines up with the home’s value.

An assessment, on the other hand, involves an assessor looking at sales from recent years, not recent weeks or months. The assessor will also look at any improvements that have been made on the home, particularly those where permits were utilized. This assessment is purely for tax and insurance purposes – if the assessed value of your home goes up significantly, your loan payment will also go up to cover the money needed in your escrow account. It’s also possible, however, for this number to go down and lower your payment.

For more on home assessments, or to learn about any of our mortgage loan services or rates, speak to the staff at Altius Mortgage today.