Time to Refinance? Know The Refinance Appraisal Process
Are you planning to refinance your home? Rates are so low, if you are able to qualify for refinancing it may make sense to do so. You can use our Refinance Calculator to compare the rate you’re currently paying to the rate you can get when you refinance.
After you have selected a lender and have completed the preliminary qualifications (which vary by lender, but generally include verification of your income, debts and assets, along with your current credit score), your lender will order a refinance appraisal.
You may have questions surrounding the appraisal process and what to expect when the appraiser visits your home for the appraisal inspection. A property appraisal, either for refinancing or for purchasing a home, is your safeguard against spending more on your home than it’s worth – either by borrowing too much against your home or by spending too much on upgrades and improvements. The home appraisal for refinance also reassures the mortgage company that they are not lending out more on a property than the current Fair Market Value (or the percentage of fair market value that is within their lending guidelines).
Who Does the Appraiser Work For?
Appraisers do not work for the mortgage and are experts in providing an unbiased opinion of value of real property. Appraisal IQ is an independent property appraisal company, located in Austin Texas. We appraise property as our only line of business and are not owned in part or in whole by any other company or lending institution.
The appraiser’s unbiased opinion of value for your refinancing appraisal is determined by a thorough assessment and analysis of the property and of the other homes in the area that have recently sold that are similar to the one being appraised. These other homes are called the comparables.
Please read Appraisal IQ’s article on the Appraisal Inspection (including an Appraisal Video) for more details about what will happen when the appraiser visits your home.
Frequently Asked Refinance Appraisal Questions
- Will I recover the cost of my improvements?
Improvement costs are not usually recovered in the real estate market except under carefully planned circumstances. Please read Home Improvements Return on Investment for more information. If you have updated your kitchen, the appraiser may give additional value the updated kitchen but will not take into account the separate materials and their cost (i.e., you may have spent $45,000 but only added $12,000 of value to the property). Other improvements such as a new roof, energy efficient furnace, double-paned windows, and paint are generally considered to be normal maintenance to maintain the property and are unlikely to add value to your home for a refinancing appraisal. (These upgrades, however, may make you home more attractive to potential buyers in your local real estate market).
- If my refinancing doesn’t get approved, can another lender use the refinancing appraisal I’ve already paid for?
Currently, An appraisal is not portable between mortgage companies, even if you have obtained consent from the original lender. We hope this limitation will be addressed by the reforms in the financial industry mandated by the Dodd-Frank Financial Reform Act which passed in the summer of 2010 (to be implemented by late 2010 and early 2011). The exception to this non-portability of refinance appraisals guideline is when an appraisal has been completed for an FHA loan within the specified time frame allowable by HUD.
- Can I refinance if my home has depreciated in value?
The answer to this question depends on the appraised value of the home and how much equity you have in your home. In order for a lender to approve your loan refinancing, the LTV (Loan to Value) ratio must be within their lending guidelines. You will need to speak with your lender specifically about what would happen if your equity isn’t within their defined limits. (For example, if the lender required 20% equity in your home and the refinancing appraisal shows you have only 18% equity, what your options would be to pursue a new loan or combination of loans on the property.)
Will Appraisal IQ Perform Your Refinancing Appraisal?
When you refinance your home, ask your lender if Appraisal IQ is on their approved appraiser roster. If not, ask them to add us – you want your home to be appraised by the local appraisal experts in Austin, not an appraiser from out of the area, which has been happening a lot this year.