Does a Refinance Require an Appraisal?

Refinancing can be done for a number of reasons and can be beneficial to the homeowner. The most common reason is to lower the monthly payments or pay off the home faster. When you’re considering a refinance, however, it is important to determine if you’ll want to have an appraisal done or if it may be a good idea to skip the appraisal.

There are No-Appraisal Refinances

It is possible to get a refinance loan without having an appraisal done. No-appraisal refinances are available through various lenders, and there are waivers that homeowners can obtain to skip the appraisal part of the loan. This allows homeowners to avoid having the home appraised, which can lead to issues if the home has a lower value than it did when the mortgage was obtained. Still, an appraisal can be beneficial, so it is a good idea for homeowners to consider whether it’s worth it to skip the appraisal or if they may benefit from having one done.

Pros to Skipping the Appraisal

If the home’s value hasn’t increased, it can be a good idea to skip the appraisal. Skipping it can help the homeowner save a little bit of money before the refinance and allows them to complete the refinancing process a little bit faster. On top of this, it can help prevent the issues that could occur if the appraisal comes in lower than expected. To determine if it may be a good idea to skip the appraisal based on the home’s value, it’s possible to look at real estate websites and view an estimate of what the home may be worth today compared to when the mortgage was obtained. If it hasn’t changed much or has lowered, skipping the appraisal could be the right move.

Cons to Skipping the Appraisal

Appraisals can be helpful for those who are refinancing to get a better interest rate or who are looking to stop paying the private mortgage insurance. If the home has increased in value, then the LTV ratio will be lower. This could lead to a lower interest rate, which will help the homeowner save money in the long run. On top of this, if the current mortgage requires PMI to be paid, getting an appraisal may make it possible to remove that. If the appraisal shows the homeowner has more than 20% equity in the home based off the appraised cost, the refinance loan may not require PMI. This can help the homeowner save even more money on the life of the loan.

Whether or not to do an appraisal can be a tough decision, and it all comes down to how the appraisal may impact the refinance. While there are good reasons to have an appraisal done, it could potentially cause issues if the appraised value is lower than the amount the mortgage is for. Consider the current value of the home carefully to determine if getting an appraisal is a good idea or if it may be better to seek a no-appraisal refinance or ask for a waiver.