Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as Credible below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders, all opinions are our own.
A home appraiser evaluates your home and determines its market value. When you decide to refinance your home, your lender might require you to get an appraisal before approving the new loan. However, a refinance appraisal might not be required in all cases.
Heres what you need to know about refinance appraisals:
There are a few advantages to getting a refinance appraisal. While you might be tempted to skip an appraisal, here are some reasons to consider moving forward with one.
One of the biggest advantages of a home appraisal for mortgage refinance is the potential to get rid of your private mortgage insurance (PMI). If the market value of your home has increased to the point where your mortgage loan amount is less than 80% of the homes value, you can avoid PMI on your new mortgage. That could potentially save you thousands of dollars.
Right now, mortgage refinance rates are near historic lows. Refinancing could help you take advantage of that lower rate, and if your home comes in at a higher value, you could get an even lower rate. This can translate to a lower monthly payment as well as interest savings over the life of your home loan.
If youre ready to see what refinancing rates you qualify for, Credible can help. Get started by comparing rates from our partner lenders in the table below.
With a higher appraisal, you might be able to cash out a higher amount if your mortgage refinancing goal is to get extra money from the deal. Combined with a lower interest rate, this might allow you to reach some of your other financial goals in a more cost-efficient manner.
Find Out: How to Refinance Your Mortgage in 6 Easy Steps
Even though there can be some advantages to an appraisal, there are also some downsides. Before you move forward, weigh the potential disadvantages to having an appraisal.
The cost to refinance includes a home appraisal fee as one of the expenses. The average cost of a home appraisal typically ranges from $300 to $500. Thats something to keep in mind.
Another downside to an appraisal is that you could end up with a lower property valuation. If thats the case, you could be stuck with PMI. Theres even a chance you might not be approved for a refinance because of your higher loan-to-value (LTV) ratio.
Depending on your situation, you might be able to skip a home appraisal for your refinance. One of the main factors in whether you can avoid the appraisal has to do with your LTV ratio.
Learn More: Cash-Out Refinancing vs. Home Equity Loan: How to Choose
When getting a home appraisal to refinance your mortgage, its important to understand that the appraiser will compare your homes features to those of similar homes recently sold in the area.
Realize that there are a few things that can go wrong during an appraisal. One of the biggest issues to be aware of: repairs. If there are repairs that need to be accomplished ahead of the closing, it could hold up the process and impact the overall appraisal.
Additionally, if you have to get the home appraised again, or if there are other issues, the closing on your refinance could be delayed and that could result in paying the cost of a rate-lock extension or a higher interest rate.
There are some no-closing-cost refinance options, but some of them might roll the expenses into the loan and cost more in the long run. Be aware of that before you move forward.
Learn More: How Often Can You Refinance Your Home?
Before opening your doors to an appraiser, its important you come prepared. Here are a few ways to best prepare for a home appraisal:
Find My Refi RateChecking rates will not affect your credit
About the author
Miranda Marquit is a mortgage, investing, and business authority and a contributor to Credible. Her work has appeared on NPR, Marketwatch, FOX Business, The Hill, U.S. News & World Report, Forbes, and more.
Home All Mortgages When to Get a Refinance Home Appraisal and When to Skip
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