Refinancing your mortgage? That’s a great way to decrease interest rates or improve your loan terms based on your needs. Here’s what happens during a home appraisal for refinance.
Firstly, you will need a new home appraisal for refinancing a mortgage plan. It will provide confirmation of the property’s value and impact your new loan amount. If the appraisal is too low, you won’t be able to refinance.
Hence, here is a guide on what happens during a home appraisal for refinance.
Get A Free Mortgage QuoteWhat Happens If the Appraisal Rate Is Low or High?
The appraisal establishes the value of the home. It affects the overall loan-to-value (LTV) ration for the refinancing loan.
If the appraisal’s estimate is higher than the price you purchased the home at, you can get refinancing! It means that the value of the home is increasing, and that’s great. If you are going for a cash-out option, you can even get better interest rates or get more funds than you originally thought.
If it’s lower than the purchase price, it could be a deal breaker. The lender may end up giving you higher interest rates or disapprove the refinancing application. You won’t find any lender that approves a refinancing loan for more than the value of the home.
What Is the Appraisal Cost and Who Pays?
You will have to cover the appraisal cost as part of the application. You can also add it to the loan amount. It costs around $300 to $500 for a single family home. They can be more expensive for bigger properties.
What Happens During a Home Appraisal for Refinance?
The appraisal will include a few basic things about the property to value it for refinancing.
1. Size and Condition of the Home
The appraisal will look at the size and layout of the home’s interior and exterior. They will note down the number of rooms and the total square footage of the property.
Before you get an appraisal, you can try renovating the bathroom or kitchen to improve your home’s overall condition.
2. Comparable Homes
Appraisers look at some comparable properties in the area to determine the home’s worth. You can do this too before going for refinancing.
Notably, there are definitely specific features that need to line up in order for a property to be considered comparable.
3. Utility Systems
Appraisers also check out the plumbing, electricity, and HVAC systems of the property. You can ask an electrician to come beforehand to check your home before the appraisal and fix any issues. It’s also a good idea to make sure that faucets and hot water works properly. A fully functioning HVAC system also increases the home’s value.
4. Amenities
Any local amenities can improve the overall value of the home. Remember to point these out to your appraiser since they can work in your favor.
5. Patio or Deck
Yes, patios and decks also drive up the value. You should make sure the entire area is clean before the appraiser comes. Adding some decoration like flowers can also help!
6. Outdoor Kitchen or Living Area
Outdoor kitchens, home extensions, and other landscaping features can work in your favor. Of course, these are expensive, so you don’t need to do this before an appraisal. However, you can add a few changes that you will end up enjoying too like a barbecue, music system, or new furniture. Do clean up any stray branches or weeds from your backyard before the appraiser comes, too.
7. Special Indoor Features
If you have a sunroom or a unique indoor space, make sure to point it out to the appraiser. You can take a moment before the appraiser arrives to clean it up and set up the furniture in an aesthetic manner. Try adding some paintings or plants.
8. Roof Repairs or Replacement
Roofing is important to protect the owners and crucial for the value. If you recently had it repaired or replaced, let your appraiser know. You can also give them some paperwork about the repair. This step is important since it may not be visible to the appraiser, so you should make sure to focus on it.
9. Plumbing Upgrades
Plumbing upgrades are also not noticeable to appraisers. If you had the pipes of your home upgraded, let them know! You can tell them about the areas that were changed and what materials you upgraded to.
10. Durable Fixtures
Changing old fixtures for new, durable ones can be a factor in increasing the home’s value. This is especially true for pre-owned homes. Durable fixtures will last longer and provide more value over time.
Appraisers will note down if the fixtures are working but may not realize that they are new. You should let them know if you recently got the fixtures.
11. Bathroom Upgrades
Appraisers will appreciate new bathroom upgrades and add it to the home value. You should point out features like heat lights, bathtub jets, or high water pressure.
12. Energy-Reducing Upgrades
Any changes to the property that bring down the energy bills are a plus point. For example, you have new solar panels. That adds 3-4% at once! Other items can include a new furnace, eco-friendly AC system, or insulation.
Get A Free Mortgage Quote13. Kitchen Remodel or Expansion
If you have recently expanded the kitchen, the appraiser can compare it to the floor plans and note it down. However, they won’t be able to tell if you have added any upgrades. You should highlight any new features like new cabinets or a modern sink.
14. Negative Features
Yes, the appraiser will be on the lookout for any features that are negative. It can include leaking pipes, peeling paint, old kitchen, or weathered exterior.
You should definitely spend some time trying to fix as many of the issues as possible. It will definitely impact your total appraisal value and your ability to get refinancing.
The cheapest and easiest way to fix up the home is to repaint it. It can completely transform the home and make it look beautiful.
Plus, even if you cannot repair each issue or go for a major remodel, there is an easy way to improve your home’s value. Clean up! Making sure that each area is looking its best can be the best step to getting a good appraisal. You can also try to add a few décor items like a plant to make the area look more modern.
15. Location of the Property
The location of the home will matter a lot in the final appraisal amount. For example, living next to a loud train track or highway will bring down the value. Good schools in the area can increase the value of the home.
While there isn’t much you can do about nearby places, you can still make a list of all the places nearby that are great. You can include shopping areas, parks, community pools, and even showcase if the property is near the city for jobs.
Conclusion
Now you know what happens during a home appraisal for refinance! You should try and calculate the home’s value before the appraiser comes and make some improvements to increase the value of the property. This will give you the best refinancing rates!