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?
If you’re eligible to forgo a refi appraisal, should you take a pass or order one anyway? Here are the pros and cons of getting your home appraised.
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.