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Refinancing your mortgage can be a big money saver. That's especially true right now, while mortgage refinancing rates are near historic lows.
One of the biggest consumer pain points of refinancing is that doing so typically requires a home appraisal. This certainly makes sense. Banks want to know that the value of your home justifies the amount of money they're giving you. Even so, the appraisal process can be stressful.
With that in mind, is it possible to refinance without an appraisal? And how do you get a no appraisal refinance? Here's what homeowners need to know.
Yes, in some circumstances. If you have a non-conventional mortgage (FHA, USDA, VA, for example), you probably can refinance without an appraisal. But if you have a conventional mortgage -- or you're planning on doing a cash-out refinance -- you'll need an appraisal. Banks are not in the business of putting money into borrowers' hands without knowing the value of the asset backing the loan.
Even if you don't need to get an appraisal, you might want to. If your home has increased in value since you bought it, an appraisal will show that. This will improve something called your loan-to-value ratio, which is important in getting a good rate on your mortgage. A loan-to-value ratio compares the amount you're borrowing to the worth of your house. If you aren't borrowing much compared to how much your home is worth -- say, you're borrowing $100,000 and your home is worth $300,000 -- you could score a lower refinancing interest rate.
Everyone's situation is unique. Check out our mortgage calculator to see how much of an impact refinancing might have for you.
There are a few specific types of refinancing mortgage loans that have an appraisal waiver for many borrowers:
There are a few other requirements for each of these. They all require borrowers to have a good reason to refinance, such as to reduce the interest expense or change the term of the loan. And while you won't need an appraisal, you'll still need to pay for other closing costs on your refinance.
Finally, it's important to point out that just because you can get one of these loan types without an appraisal, it isn't automatically waived. Depending on your circumstances, an appraisal may still be required by some refinancing lenders.
Possibly. If the value of your home has increased significantly since obtaining your original mortgage, it could be in your financial best interest to get an appraisal. In this case, an appraisal might get you a lower interest rate. Additionally, if getting an appraisal can reduce or eliminate your private mortgage insurance expense, it can be worth paying for.
Every situation is different. There are some cases where a no appraisal refinancing can be a smart financial move, and others where obtaining an appraisal can be worth the cost and effort. Check with a lender or experienced mortgage professional to see what options might be available (and beneficial) to you.
Here are some other questions we've answered:
Refinancing your mortgage could save you hundreds of dollars for your monthly mortgage payment and secure you tens of thousands of dollars in long-term savings. Our experts have reviewed the most popular mortgage refinance companies to find the best options. Some of our experts have even used these lenders themselves to cut their costs.
In most cases, lenders require an appraisal when refinancing to make sure the new loan is justified by the value of the asset it represents. A no appraisal refinance doesn't have this requirement.
Borrowers of certain federal loan programs, including FHA, VA, and USDA loans, can qualify for a no appraisal refinance if they don't plan to get cash back.
Possibly. If the value of the property has increased significantly since the original purchase, an appraisal could help you get a lower interest rate or get rid of PMI.
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