Property Appraisal (Valuation)
A professional estimate of a property's market value, used by lenders, buyers, and sellers.
An appraisal is an independent assessment of what a property is worth, based on its condition, size, location, and comparable recent sales. Lenders require one before approving a mortgage to ensure the loan is not larger than the property justifies, which directly affects your loan-to-value ratio. Buyers and sellers use appraisals to set realistic prices and avoid overpaying or underselling. Values change over time, so an old appraisal may not reflect the current market. Keeping an up-to-date estimate makes your net worth and home equity figures meaningful.
Example
A bank appraises a flat at $300,000; if you applied to borrow $270,000, that sets a 90% loan-to-value ratio for the mortgage.
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Related terms
Mortgage
A long-term loan secured by real property, used to finance the purchase of a home or investment property, typically repaid over 15–30 years.
LTV (Loan-to-Value Ratio)
The ratio of the loan amount to the appraised value of the property, expressed as a percentage. Lower LTV means less risk for the lender.
Rental Yield
The annual rental income from a property expressed as a percentage of its purchase price or current market value.
Home Equity
The portion of your property you truly own, its market value minus the outstanding mortgage.