Refinance rates merit appraisal questions

Have you decided to take advantage of today's low refinance rates? Weigh the pros and cons before ordering a refinance appraisal.

If current refinance rates have you meeting with your lender, you'll likely be asked to order a refi appraisal before your new loan can be approved. Refinance appraisals, which are an assessment of your property value, are a common part of the refinance process.

However, a refi appraisal isn't always a must. Lenders sometimes take part in special programs that allow qualified homeowners to skip the appraisal process altogether.

Should qualified borrowers skip the refi appraisal?

The benefits of an appraisal may include:

• Avoiding private mortgage insurance. If it turns out that your home is worth more than you (or the lender) anticipated, you may be able to avoid paying PMI.
• Securing a lower rate. Refinance rates are dependent on the value of your home, so if an appraisal shows that your home has increased in worth, you may be eligible for a lower refi rate than you anticipated.
• Recognizing rising trends. Qualified appraisers are often able to recognize rising trends in home prices and make note of them in the appraisal.

The drawbacks of an appraisal may include:

• Cost. Refi appraisals cost about $400 on average, which may be a hefty price for someone who is trying to reduce their monthly payments.
• Diminished property value. A refi appraisal may determine that your home is worth significantly less than you or your lender anticipated. This may be the case in neighborhoods that have undergone a rash of short sales and/or foreclosures. A dip in the value of homes can definitely affect refinance rates.

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