Thanks to the process of refinancing, you can replace your current mortgage contract with a new one whenever you see fit! While there are closing costs to consider, most homeowners agree that when the time is right, refinancing is a smart financial move that can save hundreds or even thousands of dollars.
Refinancing can accomplish a variety of goals, such as lowering your monthly payment, helping you own your home more quickly, adjusting the period of time you have to pay back the loan, or even switching from an adjustable interest rate to a fixed one.
But what many don't realize is just how important the appraisal is to the refinancing process. Let's explore home appraisals more, their role in the refinancing process, and ways you can boost your home's value.
Why Are Appraisals Necessary?
The appraisal process is a necessary step for your mortgage lender to take, as it ensures that they are not lending you more money than the home is worth. It also helps you more accurately understand how much equity you've built. Knowing your equity is very important, especially if you currently pay for private mortgage insurance. If you have 20% or more equity, you may be able to say goodbye to private mortgage insurance requirements, which means money saved each month!
Appraisals should be taken very seriously by homeowners, as they can make or break a refinance.
When it comes to refinancing, the homeowner is responsible for the cost of the appraisal, which can be a few hundred dollars. If you are looking to refinance and are not prepared when the appraiser arrives, you'll rack up more costs, as you'll have to pay for someone to come out a second time.
The assessment that your property appraiser makes carries a lot of weight with your lender. That assessment can help you get approved for the new terms you're looking for, or it may lead to you being denied, especially if the home has fallen into disarray.
What Is an Appraisal Based On?
The appraiser will determine your home's market value based on several different factors. Unfortunately for homeowners, many of those factors are outside of their control, like:
- Nearby amenities
- The state of the local economy
- The quality of schools in the area
- The number of nearby busy streets
But there are a few things that you can control, like:
- The quality of the interior
- Home improvements
- Popular features/amenities
All of these elements, as well as the market value of other homes in the area, are taken into account to determine your home's worth in its current state.
What Happens If the Appraisal Is Low?
So what happens if the appraisal comes in lower than expected? If the home's value is less than what you owe, you'll have to put off refinancing so that you can have more time to build up equity.
Common reasons homes "fail" inspection
A low appraisal can also stop the dream of canceling private mortgage insurance dead in its tracks, or in a cash-out refinance situation, it could reduce the loan amount, which means less money for necessities. That's why it's important to prepare for a home appraisal well in advance!
3 Low-Cost Ways to Boost Your Appraised Value
Now that you know all that is riding on a successful appraisal, let's review some quick, low-cost ways that can help boost your home's value!
1. Curb Appeal
Curb appeal can add a lot to a home's value, as it sets the tone for the rest of the house. Small changes like a few flower boxes and a freshly painted front door can make your home look more inviting.
Make sure any walkways and entryways are clear of debris and think about planting a small tree or two if your home could use more greenery. Landscape lighting can also boost your home's curb appeal, and it's an in-demand home feature, should there ever come a time when you'd like to sell.
2. Fresh Coat of Paint
It's surprising what a fresh coat of paint can do when it comes to sprucing up your home!
Painting the exterior can increase your home's curb appeal but don't stop there. Paint can take years off of a house or can make the interior feel updated without changing anything else. Plus, if you've lived in the home for several years, there are likely a few scuff marks here and there. Painting serves both a stylistic and practical purpose, and depending on how much of the home you are painting, it can be an affordable, quick weekend project.
3. Updated Elements
Is it cheap to rip out an entire bathroom and re-do it? No, and in most cases, a project like that doesn't allow you to recoup all of your costs should you ever sell. Can you instead replace certain elements to give your home an updated, fresh feel? Absolutely!
Rather than focusing on outdated rooms, turn your attention to elements in those rooms that you can replace for a fresher look. For example, swapping out the sink in a bathroom can make it appear more high-end and is much more affordable than updating every fixture.
Focus on the main spaces in your home, like the kitchen, bathrooms, and living room. You may be surprised how updated your entire home can look with just a few small changes in key areas.
Prepare to Refinance!
When it comes to getting approved for a refinanced mortgage, the home appraisal is an important step in the process, one that homeowners should take seriously.
Did you know that there are no-appraisal refinancing options available? Chat with your lender to see if you qualify.
If you're ready to tackle a few low-cost home improvements so you can get the most out of your home's appraisal process when refinancing, start with updating your home's curb appeal, giving needed elements a fresh coat of paint, and updating certain fixtures.
Then, use Lendgo, an easy-to-use, free online platform, to find a reputable mortgage lender who is eager to work with you. In as little as one month, you could have a new mortgage contract in hand, one that saves you a considerable amount of money!