Refinance appraisal is part of the underwriting process for a new loan. With an appraisal, you can secure a lower interest rate and improve your chances of getting a loan approved. During this process, appraisers will consider as many factors as possible:
- The location of the home
- The size of the house
- The layout
- Potential improvements
What is refinance appraisal?
Refinance appraisal is a home appraisal and part of the underwriting. The lender commissions an estimate to determine the home’s market value and ensure its price can secure your new loan. This is valuable information that will help confirm the current value of your home.
Your home is the collateral for the loan, and the lender does not want to lend more than the value of your property. After all, in the event of financial problems, the lender may decide to sell your home to return the funds. Therefore, the value of your home allows you to determine the future amount of the loan.
Is refinance appraisal always necessary?
Often, but not always. In this case, the decision depends entirely on the lender’s desire to reduce the transaction risk.
There are simplified refinancing programs where you do not need a property appraisal. For example, such as:
- Simplified FHA refinancing — the borrower receives a lower interest rate, changes in loan terms, or a transition from an adjustable to a fixed-rate mortgage.
- VA-supported optimized refinancing or refinancing loan with reduced interest rates — the borrower receives a lower interest rate and reduced monthly payments.
What factors do refinancing appraisers consider?
- Location — an appraiser will look at the situation in your area and compare the prices of neighboring houses of a similar size and with a similar set of amenities. In addition, he will pay attention to the proximity to the center, the state of the environment, and the presence of parks, schools, and community centers.
- The size of the house, as well as the number of bedrooms and bathrooms.
- Layout and functionality, availability of repairs, and other innovations. Any positive changes to your home that make it more modern and comfortable will help.
- External facilities — terrace, veranda, or garage.
- Home systems — the state of plumbing, heating, and electricity.
How to prepare for refinance appraisal
During the assessment, your home should appear in the best possible light — therefore, it is essential to prepare well and present your house pleasantly.
- Tidy up the inside and outside of the house — it is unlikely that an appraiser will appreciate scattered clothes, dust, or a garden with uncut grass
- Turn on a pleasant light, make your home seem cozy
- Adjust the air conditioning system to make it enjoyable to be inside
Before refinance appraisal, we advise you to prepare — perhaps to update the repair and technical condition of the house slightly. This will help you save money and get a higher appraised value.
Also, you can always seek advice from a mortgage broker at LBC Mortgage — to have complete information about refinancing.