An appraisal is an independent view of how much a property is worth.
Appraisals are common at the time of sale or refinancing and may include a check of the home's interior, upgrades and general condition.
Lenders will finance the property on the basis of whichever is lower—the appraised value or the sale price. Only a current appraisal is required for refinancing.
Appraisal amounts usually differ from tax assessment values. See the Quick Tip to the right for more information.
Beware of appraisals that are too high or too low compared with like properties in the neighborhood.
- If the appraisal is too low, it's possible that you may not qualify for a refinance loan based on a lender's LTV (Loan-to-Value) requirement. LTV is the ratio of your loan amount divided by your home value.
- If it's too high, you may end up offering and borrowing more than the house is actually worth which can hurt you should you decide to sell or refinance in the future.
- If you are uncomfortable with an appraisal, ask a local real estate broker to review the valuation and, if there's substantial discrepancy, get a second appraisal.
|
