What is refinancing home appraisal? What Homeowners Should Know

House appraisal for refinance is mostly a requirement for all lenders. This way the lender determines the current value of the home - this is turn help them assess the various parameters for extending the loan. This blog will he;p you understand the intricacies of the process. If you need further help in navigating the process, our team of mortgage professionals are just a call away.

Do I Need An Appraisal To Refinance?

To refinance your current home loan, underwriters of the lenders will consider a refinance appraisal or a reappraisal. Just like during the existing mortgage, the appraisal becomes an important routine to understand the condition of the property and use the parameters to estimate the value of the property, similar is the case during refi.

An appraisal for refinance is not a necessity - sometimes you can get it done without lender appraisal. However, in most cases, the appraisal will be required to protect the financial interests of the lender. The appraisal helps lenders understand your equity in the house as it impacts the interest rates and the funds that you can borrow.

Current Refinancing Data As per Fortune, the current refi rate for a 30-year conventional mortgage is 6.72% & a 20-year mortgage is 6.66%. For a jumbo mortgage, the 30-year refi rate is 7.34% and 15-year mortgage is 6.75%. For FHA loans, it is 6.13% on a 30-year mortgage and 5.42% for a 15-year mortgage. For a VA loan, it is 6.30% on a 30-year loan and 6.38% on a 15-year mortgage. The closing cost for refinancing a mortgage at present lies between 2% and 6% of the mortgage amount.

The Need For Refinancing House Appraisal

A refi appraisal is required for numerous reasons. Some of these are -

• Understanding the real worth of the property - House appraisal for mortgage helps in estimating the current value of your home. It also helps the lender understand the condition of the property - whether it has been maintained well and is it comparable with other houses in the area.
• Understanding your equity - Your equity is the difference between the outstanding loan balance and the current appraised value of the home. In home appraisal for cash-out refinance, the funds that you will get depends on the appraisal.
  

Factors Affecting Refinance Home Appraisal

During reappraisal, the appraiser will look deep into various aspects like - 

• Size or the square footage of the size. Number of bathrooms, bedrooms, etc.
• Neighborhood is considered. Is the house close to schools, shopping areas, entertainment zones, parks, etc.
• Sales of homes in your area in the recent past.
• The exterior of the house is checked. For example, the curb appeal, decks, porches, landscaping, etc. are considered.
• The interior is considered too. The utilities, electrical and plumbing connections, and other systems are checked thoroughly.
• Appraisers also evaluate if the house has undergone any home improvements and renovations. This can help boost the value of your property.

Comparing Purchase & Refinance House Appraisal

Purchase Appraisals	Refinance Appraisals
This appraisal takes into account the agreed-upon property sale price between the seller and the buyer as the reference point. As a borrower or potential homeowner, you are not required to be physically present during the appraisal as the property is still not yours.	No sale contract for reference for property price in this case.  The property’s value is determined based on factors like existing market trends, current property condition, and comps. The homeowner usually is present during the appraisal.

Home Appraisal For Refinance: Understanding The Report

The following three conditions are possible - 

1. Appraised value > Expected value

You will enjoy greater flexibility while refinancing the mortgage. The interest rate may be better if your equity is high. You may be able to eliminate PMI if your equity is above 20%. You can go for a cash-out refinance in this case.

2. Appraised value = Expected value

In this case, the home refinance appraisal report affirms enough evidence to go ahead with the proposed loan amount.

3. Appraised value < Expected value

In this case, the loan amount may be reduced by the lender. It could so happen that the refinance demand is denied by the lender, and/or you may be required to pay PMI.

Under this condition, you can disagree with the refinance home appraisal. These are a few things that you can do in this case -

1. Have the appraisal report reviewed by a professional or do it yourself.
2. Challenge the report and submit evidence for a reconsideration.
3. Ask for a second appraisal - the cost will have to be borne by you.
4. You can readjust the loan amount or go for other loan types.
5. Choose a different lender and restart the process.

Cost of Home Appraisal For Refinance 

The cost depends on few factors like -

1. Property size
2. Property condition
3. Location, etc.

The appraisal costs may be included in the closing costs.

FAQs

1. Do you need an appraisal to refinance?

Not always but most lenders will proceed. The appraisal during refinancing helps them determine your home’s current market value..

2. What do appraisers look for when refinancing?

During refinancing home appraisal, appraisers assess the current market value of your property. They review its size, condition, location, upgrades, layout, and recent sales of comparable properties nearby. They will also assess the exteriors and interiors of the property, checking out for visible damage, maintenance issues, and features that may affect value.