Refinancing Without Evaluation: Is It Worth It?
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Lenders usually require an appraisal during the refinancing process, but it is not necessary in all cases. Depending on your situation and the type of loan, you may be able to refinance without one.
Here’s what you need to know about no-appraisal refinances:
Why most refinances require appraisal
An appraisal is a professional appraisal of a home’s value. Lenders use them to make sure that you don’t borrow more than the value of your property.
When a house appraisal is required – both in a refinance or a purchase – the lender will order the service, but you will pay for it. These typically cost between $ 300 and $ 400 and are paid at closing.
If you are considering refinancing, be sure to research your lender – it could save you on both closing costs and your interest rate. Credible can help you with the rate purchasing process. You can compare the actual prequalified rates from our partner lenders, and it only takes a few minutes.
What Appraisers Look For When You Refinance
Appraisers seek to assess the value of your home to the lender. From the lender’s perspective, your home is collateral and they will have to sell it if you don’t pay off your loan. If the house isn’t worth enough, they won’t recoup their losses.
Refinance Home Appraisals are not much different from those on house shopping except that you can attend (you live in the house). This can be useful if you have made any improvements to the property that you think should be considered by the appraiser.
Once the appraisal is complete, you will receive a report showing the appraiser’s conclusions, as well as the value they place on your home.
Who can get refinancing without appraisal
There are certain scenarios where you may not need an appraisal, both with conventional loans and government guaranteed loans. These cases are not the norm, although they have become more frequent since the start of the COVID-19 pandemic.
For conventional loans
If you are refinancing a conventional loan, you may be eligible for an assessment waiver. If you do, your lender will simply use your existing data, including past appraisals, to estimate your home’s value.
When it comes to qualifying for an appraisal waiver, it will depend on the owner of your loan. Fannie Mae and Freddie Mac each have different requirements, both of which are based on the loan-to-value ratio – or how much you are borrowing against the value of your home.
|No withdrawal||Limited collection||Collection||Max. LTV|
|Fannie Mae||N / A||90% LTV||70%||97%|
|Freddie mac||90% LTV||N / A||70%||90%|
Loans guaranteed by Freddie Mac tend to see appraisal waivers granted more often. According to American Institute of Business, 26.5% of cash-out refinancing and 60.7% of interest rate and term refinancing (no cash-out) had the valuation canceled in May 2020. With the Fannie Mae loans, it was respectively 22 , 6% and 56.8%.
For government guaranteed loans
If you have a government insured mortgage, you also have options for refinancing without appraisal.
Here’s what’s currently available:
- FHA Simplified Refinancing: FHA Streamline refinances are designed for FHA borrowers who are refinancing into new FHA loans. These do not require any assessment and in some cases no credit check either.
- VA Interest Rate Reduction Refinance Loan (IRRRL): The Department of Veterans Affairs offers the Interest Rate Reduction Refinance Loan designed for borrowers looking to refinance and lower their interest rates. You must already have a VA loan to be eligible.
- USDA Simplified Aid Refinancing: Simplified Assistance Refinances are intended for USDA borrowers. They don’t require any credit checks or assessments as long as you’ve made your payments within the past 12 months. Your debt ratio is also not taken into account.
Should You Get No Appraisal Refinance?
Skipping the appraisal can save you time and money, but if your home has gone up in value, it might not be the right choice.
Benefits of refinancing without valuation
There are some important advantages to refinancing without appraisal. These include:
- Reduced costs: You will save around $ 300 to $ 400 on closing day by skipping the assessment.
- Faster processing: Appraisals extend the time it takes to close your loan. Indeed, according to the National Association of Real Estate Agents, valuation issues were behind 18% of delayed closings in January 2020.
Learn more: How long does it take to refinance a home
Disadvantages of refinancing without valuation
Of course, refinancing without valuation is not without its drawbacks. Here’s what to keep in mind before you skip yours:
- You may be eligible for more withdrawals: If your home is appreciating, you may be able to withdraw additional cash when you refinancing of collection. However, an evaluation would be necessary to confirm this.
- You could get a lower rate or avoid mortgage insurance: A higher home value also means more equity, which could qualify you for a lower interest rate or even help you avoid expensive mortgage insurance.
That your mortgage refinancing requires appraisal or not, be sure to shop around for your loan. Rates and closing costs vary by company, so shopping around can save you a lot, both up front and over the life of your loan.
Credible can help you easily find the latest mortgage refinance rates. Compare several pre-qualified rates from our partner lenders in minutes using the table below.