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Property assessments have been a hot topic recently, with many homeowners noticing a substantial increase in their assessed property values. This has raised questions, concerns, and in some cases, frustrations. As a mortgage broker, I often hear from clients who are trying to understand what’s behind these changes and how they might impact their financial plans. Let’s break down why property assessments are going up and what you need to know.
What Are Property Assessments?
A property assessment is an estimate of your property’s value as determined by your local municipality. These assessments are typically used to calculate property taxes and are based on factors such as your property’s size, location, and features, as well as the broader real estate market in your area.
It’s important to note that property assessments are not the same as market value. While they’re influenced by market trends, they’re a separate calculation and may not align exactly with what your home would sell for today.
Why Are Property Assessments Rising?
1. Real Estate Market Trends
In many areas, home prices have surged over the past few years. This is due to a combination of low housing supply, high demand, and lowering interest rates driving more buyers into the market. Since property assessments often reflect market conditions from a specific point in time, the rising prices have a direct impact on assessed values.
2. Inflation and Development Costs
Inflation has affected everything from the cost of groceries to the price of building materials. As construction and renovation costs increase, property values in areas with new developments or recently upgraded homes may rise as well, contributing to higher assessments.
3. Neighbourhood Improvements
If your neighbourhood has seen infrastructure upgrades, new amenities, or overall gentrification, these changes can drive up property values across the board. Municipalities consider the overall desirability of an area when determining assessments.
4. Municipal Revenue Needs
Property assessments are tied to property taxes, which are a critical revenue source for municipalities. While your local government doesn’t directly control market trends, higher assessments can help balance budgets in the face of increased public spending or inflationary pressures.
What Does This Mean for Homeowners?
Don’t Confuse Assessment with Market Value
Your assessed value is used primarily for tax purposes and doesn’t necessarily represent what your home would sell for on the open market. In fact, many homes sell for more or less than their assessed value depending on market conditions.
Prepare for Potential Tax Increases
A higher property assessment can mean higher property taxes. It’s worth reviewing your municipality’s process for setting tax rates to understand how your assessment translates to your tax bill.
You Can Appeal Your Assessment
If you believe your assessment is too high, most municipalities offer an appeal process. This typically involves providing evidence, such as comparable property sales or details about your home’s condition, to argue for a lower valuation.
How Property Assessments Impact Mortgages
Higher property assessments can influence your financial planning in a few key ways:
Refinancing or Home Equity Loans: Lenders may take the assessed value into account when determining how much equity you can access.
Debt-to-Income Ratios: Higher property taxes could affect your affordability calculations for a new mortgage or refinance.
Working with a mortgage broker can help you navigate these changes and understand the options available to you.
The rise in property assessments reflects broader trends in the real estate market and economy. While it can be concerning to see a significant increase, understanding the reasons behind it and the steps you can take to manage the impact can provide peace of mind.
If you have questions about your property assessment or how it might affect your mortgage plans, feel free to reach out. I’m here to help you navigate these changes and make informed decisions about your financial future.
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