A requirement for most refinances, a property appraisal indicates how much your home is worth, which gives lenders the information they need to determine your interest rate. If the amount of your proposed refinance loan is less than 80 percent of the home's value, then the lender can offer you the best interest rate. This can save you thousands of dollars over the life of the loan and help you reduce debt.
Make debt reduction possible with a favorable appraisal
Factors used to determine the value of your home include the price of similar residences sold in your neighborhood recently and your house's various features. While you can't change surrounding real estate sales, you can make sure the appraiser sees your home in the best possible light.
Tips for obtaining the best appraisal possible
- Clean up. Appraisers don't technically take into consideration how good a housekeeper you are, but they are human. A messy house sends a negative message while a clean, orderly house and yard gives a positive impression.
- Make repairs. Before the appraisal, take care of issues that could potentially affect your home's integrity like leaky faucets and pipes, cracked windows, peeling paint and dry rot.
- Point out improvements. In addition to comparing your house to recently sold residences of similar square footage, appraisers include in your home's value any upgrades you've added that increase property's worth, such as decking, flooring, cabinets and countertops, sinks, bathtubs and showers, exterior doors, siding and roofing.
- Mention neighborhood enhancements. Let the appraiser know about any recent improvements to the neighborhood, such as, the addition of amenities like parks, shopping centers and schools.
- Steer clear. Let the appraiser do his or her job without interruption from you. Avoid following the person around and keep children and pets out of the way.
An appraisal is an important part of the refinancing procedure. Ensuring that the process goes as smoothly as possible gives you a better chance of obtaining a favorable refinance loan that can help with debt reduction.
About the Author:
Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in a wide variety of publications, including Family Circle, Ladies' Home Journal, Parenting, Entrepreneur and The Los Angeles Times.