How to Refinance for a Lesser Appraisal Value
Refinancing your home for a lesser appraisal value is either very easy or very hard. If your reduced appraisal value is still higher than the amount you want to finance, the process is just like any other refinancing. If your reduced appraisal value is lower than the amount you want to refinance, you have very few options. There are some steps common to both process, and actions specific to either situation. Use the steps below to help support your success either way.
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Instructions
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Common Concepts
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Check your credit record as you begin the process. If it needs improvement, begin working on it immediately: Resolve any open adverse reports. Pay off any maxed out credit accounts or lines of credit. Set up automatic drafts to make sure your bills are paid on time.
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Consider home improvement projects to raise the value and "curb appeal" of your home. Some good examples include new paint, a backyard deck and refitting a bathroom. All three show good return for investment on home value.
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Talk with your current mortgage company. It is much less expensive to work with an existing customer than to attract a new one. This means your mortgage company may be willing to work with you if it means you won't move to another company.
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Use an online mortgage clearing house such as lendingtree.com. These Web sites distribute your information to literally dozens of lenders. Even if you stay with your existing mortgage company, offers from these lenders can help you negotiate from a stronger position.
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Keep your goals in mind as you seek a new mortgage. For example, if you are refinancing to access equity, get a new mortgage for only as much as you need. If you are refinancing for lower interest or a lower overall monthly payment, refinance only as much as you owe on your home.
Refinancing Below Appraised Value
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Keep in mind that lenders often won't finance more than 80% of the appraised value of your home.
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Seek a new mortgage for the lowest amount possible, depending on your needs.
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Seriously consider a shorter term mortgage. If refinancing for less than your original loan, this can cut five or ten years off your mortgage while you make the same payments as in the past.
Refinancing Above Appraised Value
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It usually is difficult to finance any amount above 80% of your home's appraised value.
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Be prepared for the answer "no." Refinancing an "upside down" home can be very difficult.
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Start working on your credit history at least a year before you start looking for the loan. Success in refinancing will require a very good credit score.
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Check with the Federal Housing Authority to see whether they are sponsoring any aid programs. In some cases you may qualify for federal assistance in getting your home refinanced.
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Check with local, regional and state agencies for similar kinds of help.
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