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How to prepare for a mortgage refinance appraisal

Removing clutter, repainting and updating fixtures can help increase your appraisal value.

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Kimberly Ellis
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Part of the mortgage refinance process is a property appraisal. Your lender hires an independent real estate appraiser to calculate your home’s market value based on several criteria, such as its size, age and condition.

The professional appraiser takes note of any home improvements you’ve made or any areas of disrepair. The entire visit generally takes between 30 to 45 minutes, but may be longer depending on the size and features of your home. Then, based on that visit and the home values of properties similar to yours, the appraiser determines how much your property is worth.

Home appraisal checklist

Preparing for your appraisal can help boost your home’s market value. While you don’t need to do an expensive remodel, you can tackle a few projects to improve the condition of your home’s interior and exterior.

Here are six tips for how to increase the appraised value of your home for refinancing:

Clean up and remove clutter

Think of an appraiser as a guest in your home that you’re trying to impress. Tidying up and organizing your home helps make a good first impression.

Repaint or do a few touchups

Peeling, chipped or faded paint can give the impression that the home isn’t in good shape. And dirty, marked-up walls can date a home. A coat of fresh paint or touching up critical areas can show that your property is well-maintained.

Fix damaged carpet or flooring

While you might not replace all of your carpet or flooring, as you may if you were selling a house, you might want to address the obvious, damaged sections. And a thorough, professional carpet cleaning couldn’t hurt, either.

Update the kitchen and bathroom

Appraisers actively look for home improvements. The kitchen and bathroom are big selling points that can affect your home’s value. Consider low-cost upgrades that are aesthetically pleasing and can add real value to your home. For example, you can replace light and sink fixtures, repaint cabinets, change cabinet hardware and refinish countertops.

Up your curb appeal

The exterior of your home can be just as important as the interior. According to Alex X. Niemiera, a professor at the School of Plant and Environmental Sciences at Virginia Tech, an attractive landscape can increase the perceived value of a home by 5.5% to 11.4%. That means a $200,000 property could seem $11,000 to $22,800 more expensive.

Make a list of things to point out

Point out upgrades or features to the appraiser that may not be readily obvious. You may also want to mention if your tax records are incorrect. The appraiser must have all the necessary information about your home before they issue a report.

The importance of a refinance appraisal

A proper appraisal can make or break your refinance. A low assessment can negatively affect what interest rates you qualify for and jeopardize your refinance approval altogether. Your eligibility to refinance may be at risk if your appraisal comes back lower than you expected.

Should you skip the refinance appraisal?

Qualified borrowers of specific loan programs — like the FHA Streamline refinance — may have the option of skipping a refinance appraisal. But if the homeowner feels that their home value has increased, a full appraisal may be beneficial.

Pros and cons of a refinance appraisal

Here are some advantages and disadvantages of a refinance appraisal.

Pros

  • Avoid PMI. Lenders require private mortgage insurance (PMI) if you have less than 20% equity. A higher refinance appraisal could mean that you have more home equity — possibly enough to ditch PMI altogether.
  • Lower interest rate. A higher refinance appraisal can drop your loan-to-value (LTV) ratio. A lower ratio means that you pose a lower borrowing risk, which might qualify you for a more competitive interest rate.
  • Cash for cash-out refinances. Lenders generally allow a maximum 80% LTV ratio. So the higher your appraisal, the more you can take out in cash for large expenses, if needed.
  • Better odds for approval. An appraisal that works in your favor and lowers your LTV makes you a more attractive borrower and increases your chances for approval.

Cons

  • Low valuation. If your refinance appraisal determines that your home is worth less than you anticipated, it may change your LTV ratio and affect your application approval.
  • Appraisal fee. The cost of an appraisal varies by region, but can run you about $300 to $700.

Bottom line

An appraisal is critical to your mortgage refinance. Proper preparation can help increase the appraised value of your house. A high appraisal can make you a more attractive borrower and give you an edge when refinancing, while a low appraisal can negatively affect your refinance application.

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