Final answer:
An appraisal on the property allows the mortgagee to determine its market value, protect their interests, and evaluate loan-to-value ratios.
Step-by-step explanation:
A mortgagee would have an appraisal on the property to determine its market value. An appraisal is an assessment conducted by a certified appraiser to estimate the value of a property. This information is important for the mortgagee because it helps determine the loan amount they are willing to provide and ensures that the property is sufficient collateral for the loan.
The appraisal also protects the mortgagee's interests by ensuring that the property is not overvalued, which would expose them to higher risk if the borrower defaults on the loan. It provides an objective and independent evaluation of the property's worth.
For example, if a borrower requests a mortgage loan for a property valued at $500,000 but the appraisal reveals that the property is actually worth $400,000, the mortgagee may adjust the loan terms or decline the request altogether, as the loan-to-value ratio would be too high.