My Mortgage Blog

It's property assessment time again! You should have received your annual City Property Assessment in the last couple of weeks. If you haven't, please contact the City to have a duplicate copy mailed.

First: the Property Assessment

Each year the City of Calgary updates the assessed value of your home to ensure a fair and equitable distribution of the civic tax burden. Let's be clear: the assessed value and the market value are rarely the same. If they are, it's pure coincidence.

Why?

The City's value determines your yearly property tax levy. So, the a lower the assessed value, the less you pay in property taxes.

According to the City of Calgary website, "to determine a fair market value for your property (what it would have sold for on July 1 of the previous year), assessors look at many factors, including your property's details and sales of properties similar to yours that sold in your neighbourhood in the last three years." Basically, the value is already outdated by the time you receive your assessment in January. Real Estate markets change a lot in six months.

The City also looks back three years which is over two and a half years longer than a typical Current Market Assessment (CMA) from a licensed RealtorĀ®.  A lender or an appraiser will only consider "comparables" within 90 days of the current date to determine the value of the property.

We have seen an average of a ten per cent drop in Calgary home values since 2014. It is not reasonable to expect the value of our home is comparable, today, to the value of another, similar property sold three years ago.

Finally, if the City doesn't have the current details of the property (ie. renovations), the value cannot be accurate.

While the City assessed value may not be 100% accurate, it does give you an order of magnitude change in value year to year. If you want a more accurate idea of the market value of your property, contact your RealtorĀ® and ask them to complete a CMA.

Second: Your Mortgage

Even if you put more than 20 per cent down when you purchased your home, there are many reasons why you might end up under water (ie. in a negative equity situation).

Negative equity means that the value of your home is lower than the balance of your mortgage.

This week I read a good article on what to do if the value of your home is less than the amount you owe. While the Government has introduced several regulations to try and prevent Canadian borrowers from getting into a negative equity situation, it can still happen.

The article talks about how to avoid ending up under water. Suggestions include not spending more than fits your budget and waiting and saving more of a down payment.

So what do you do if you find yourself underwater?

The article gives some tips to positively impact your situation.

  • If you have the cash flow, accelerate your mortgage payments to pay down the mortgage faster
  • If you don't have the cash flow:
    • Tighten you budget to increase your payments, even a small amount, and decrease the balance owing
    • Generate extra income and put it towards the mortgage (ie. rent out a room, garage etc.)

Whatever you do, consider your overall situation carefully. Remember, what got you here, won't get you there. Don't fall into the same traps that you've fallen into in the past. Be disciplined. Your financial future may depend on it.

Finally, your situation might not be as dire as you think. But if it is, let it be your wake-up call to get your overall financial situation into better balance.

If you need to be connected with someone who can help, email me. I'd be happy to introduce you to professionals in my network that can, if I'm unable to.