New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
- advertisement -
Bankrate.com
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Equity
Auto CDs &
Investments
Retirement Checking &
Savings
Credit
Cards
Debt
Management
College
Finance
Taxes Personal
Finance

Dr. Don Taylor, CFA, Bankrate.com advice columnist Changed appraisal wipes out equity

Dear Dr. Don,
Last year my husband and I refinanced our home. When the mortgage company did the refinance they did an 80/20 with the 20 being an equity line of credit. Well, the broker told us our house was appraised for over $300,000 but it turned out the mortgage company changed the appraisal for much less. We didn't know about this until after the papers were signed and the mortgage company used all of our equity when they refinanced.

Is there a way, even though we don't have any equity, that we can change the line of credit to a second mortgage or refinance again to combine the two? Or is there anything else we can do?
-- Michele Mortgage-Morass

- advertisement -

Dear Michele,
An 80/20 is also known as a piggyback loan. The first mortgage is for 80 percent loan-to-value so there's no need for the homeowner to pay private mortgage insurance, or PMI, and the balance is financed with either a home equity line of credit, or HELOC, or a home equity loan. An 80/10/10 loan has the homeowner making a 10 percent down payment, or in a refinancing, the homeowner has some equity in the property based on the appraisal.

From your letter it sounds like you expected the financing to be more like an 80/10/10 loan than an 80/20 loan and the mortgage lender changing the appraisal makes it look like you don't have any equity in your home.

The good news is that the downward appraisal doesn't change the terms of your current loans. If you want to refinance, the new appraisal will determine how much equity you have in the home and what financing options make sense, given that appraisal.

Homeowners typically have a pretty good idea what their home is worth. If you are confident that yours is worth more than the current lender's appraisal, then there's no reason to worry about how the earlier appraisal will affect your future financing options.

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "financing a home," "saving & investing" or "money."

Bankrate.com's corrections policy-- Posted: Feb. 15, 2007
More Q&A stories from Dr. DonAsk a question
 RESOURCES
Alert: when mortgage rates hit your target
80-20 mortgages: No money down no PMI
Guard yourself against appraisal shortfalls
 TOP HOME EQUITY STORIES
Home equity can be used to buy car
Interest Rate Roundup
Interest Rate Roundup


Home Equity
Compare today's rates
NATIONAL OVERNIGHT AVERAGES
$30K HELOC 4.29%
$50K HELOC 4.04%
$30K Home equity loan 5.08%
Rates may include points
RELATED CALCULATORS
  Calculate your payment on any loan  
  How much house can you afford?  
  Can you borrow from your home equity?  
VIEW ALL  
FINANCIAL LITERACY
Rev up your portfolio
with these tips and tricks.
- advertisement -
- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here.

Bankrate.com ®, Copyright © 2014 Bankrate, Inc., All Rights Reserved, Terms of Use.