Clawing our way to financial independence

Last week we received our property assessment from the government, and I was dancing with joy.

In 2007, our assessment valued our house at $229,000. We bought the house for $233,000 in 2006, so the assessed value was below the amount owed on our mortgage, which we got with 5% down plus taxes.

In 2008, the assessed value of our house is $300,000. This is an increase of about 31% in a year and a half, well above the neighbourhood appreciation which was between 10-25%. However, as of the 2007 assessment, which was done in 2006, the house was still being built, and thus the house was clearly undervalued. We knew that last year, and also knew that the assessed value can be below the market value, at least at the moment here in BC when real estate values continue to rise.

However, the lower assessment value impacted our ability to ask for a consolidation loan at our local credit union last summer. Even though I knew our house had a higher value than our 2007 assessment, the loans banker would only consider the assessed price of our house when calculating our net worth, the consequence of which put us into a negative net worth category. And the credit union will not lend to anyone with a negative net worth, even for consolidation loans.

The other reason I am pleased with the new assessment is that we may now be able to consider remortgaging (presuming we decided the penalties and fees were acceptable) our house in the future and combining our loans into the mortgage at a much lower interest rate because we now owe less than 80% of our house value; a magic number for bankers who will remortgage up to 80% of our house value. It does not currently make sense for us to do this, but we are much closer to the possibility than we were previously.