Refinancing? Here's how to boost your home’s appraisal value before applying

If your home loan term is due to end soon, and you may wonder how you can smartly increase your home value in just a few steps, we have some tips.

Maybe your life circumstances have changed, or you are trying to take advantage of the real estate boom or looking to find a better rate. There are many reasons why refinancing your mortgage may be a good idea. Going through refinancing comes with its costs, including closing fees and insurance, but when the time is right, refinancing your mortgage can be a wise financial decision that can help you save more in the long run. 

When you refinance, you can replace your existing mortgage contract with a new one that fits you better and helps you save money. Refinancing can help you in a myriad of ways, including:

• Finding a better rate
• Switching from a fixed rate to a more flexible variable one
• Lowering your monthly payments (or getting rid of them entirely)  
• Helping you pay off your mortgage entirely 
• Adjusting your terms, so you can reduce the time it takes to pay the lender back
• And more.
  

Sounds great, right? But, while refinancing is an excellent option for homeowners, many fail to recognize that their new mortgage will be subject to an appraisal. Appraisals are integral to any mortgage or home equity lending process and can impact how much their home is valued, affecting the overall amount they can borrow. 

This blog will look at home appraisals, why they matter when you are refinancing, and three ways to boost your home’s value this month, just in time for spring. 

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Why do I need a home appraisal? 

Appraisals are an essential step in the mortgage lending process - and can make or break a refinance deal. Since you are borrowing against your home, an appraisal allows your lender to determine your home’s worth through a third-party appraisal inspector. An appraisal is critical in ensuring that you don’t take on more debt than your home is worthwhile accurately understanding the amount of equity you have built up in your home. 

Don’t forget that an appraisal is different from an inspection. Appraisals assess a home’s value and inspections help you understand a home’s current condition. Read our blog to learn the difference.

Understanding your equity is vital - particularly if you are paying out of pocket for private mortgage insurance. Homeowners who have 20% or more home equity built up may be able to reduce their monthly spending by getting rid of their private mortgage insurance. 

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Who pays for a home appraisal?

Depending on your role, the seller or buyer is on the hook for paying the appraisal fee for a real estate transaction. If the buyer is appraising a home for a mortgage, the lender may cover this cost. 

In the case of a refinancing agreement, the homeowner is responsible for the organizing and cost of the appraisal via an accredited third-party appraisal company. In Canada, the costs can be anywhere between ​​$400-600 depending on the size and type of appraised home. In the US, it costs around $375, depending on the size and type of home being appraised. 

An assessment of your property is a determining factor in the lending process. Your appraisal can help you get approved for or negotiate new terms, or it can lead to your refinancing request being denied, depending on the state of the dwelling in question. 

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What happens if my home appraisal is low?

Following an appraisal, your home may come back at a lower value than expected. Never fear. If your property is less than what you currently owe on existing mortgages, you may have to put off refinancing and focus on building more equity in the home. 

A low appraisal can also prevent you from getting rid of your private mortgage insurance or even reduce the amount of cash you receive from a cash-out refinance - this could mean less money or cash flow for necessities. You must take an appraisal seriously and prepare well in advance to hedge your bets. 

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What can I expect during a home appraisal?

When you have an appraiser come to your home, you ask them to determine its market value. To do this, they take a few things into account - including some things that may or may not be out of the hands of the homeowner.

Here are a few factors that go into determining a home’s value: 

• Nearby comparable properties and market values
• Local amenities
• The quality of schools in the area
• Walk score
• The current state of the local economy
• The number of nearby busy streets
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Many of these things can be out of your hands. But, there are a few things that you can control, such as: 

• Home improvements or upgrades
• The quality of the interior
• The quality of the exterior (curb appeal) 
• Popular features/amenities
  

These elements and the market value of other homes in the area are taken into account to determine your home’s worth in its current state.
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Three easy ways to boost your home appraisal value 

Now that you understand how critical an appraisal can be, here are a few ways you can quickly and cheaply boost your home’s value this month. 
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A fresh coat of paint‍

A new coat of paint can breathe life into your home and space. 

Updating the interior with a new color can take years off the house. And, it’s a relatively easy and cost-effective way to upgrade your space in advance of an appraisal. Painting is both a stylistic and practical update. This can be a quick weekend project, whether you’re doing all or just parts of your home. 

Patch up holes in the wall and slap a new coat of paint on the main areas of your home and see what a difference it can make! 

Don’t forget the exterior! Painting the outside of your home can spruce things up and increase your overall curb appeal. 

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Curb appeal‍‍

How does your home look from the outside? Are the trees pruned? Are there flowers? Curb appeal can seem like a small thing, but it can add a lot to a home’s value. Since your exterior sets the tone for the rest of the house, updating your property on the outside can make your home look and feel more inviting. 

Minor changes such as adding some tasteful flower boxes, giving your window frames a fresh coat of paint, or updating your outdoor lighting can be a quick weekend project. 

Cutting the grass, clearing pathways of debris, and planting a few small trees can add a little color to your space. Adding in some landscape lighting can go a long way in boosting your home’s curb appeal. 

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Updating elements or features‍

You may not want to – or need to – rip out your entire powder room and redo it. That could be costly and time-consuming. And when it comes to bathroom redos, the amount you spend won’t always be recouped when you sell. 

You can, however, spruce up your home by judiciously updating a few elements across your home. Our tip? Try looking for more minor, cost-effective updates vs. bigger full-room redos, for example, replacing the covers on electrical outlets, updating cabinet knobs, or even replacing faucets or sinks. These minor fixes go a long way in making your home appear more high-end and put together. 

Prioritize the central areas of your home, including the living room, kitchen, and bathrooms. While small, these changes can significantly impact your home’s evaluation. If you’re looking to do a bigger job, here is how you can pay for more considerable improvements. 

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Ready to refinance? 

When you’re in the process of refinancing, your home’s value can make or break your chances of getting approved. Take some time this weekend to review areas of your home that can be quickly updated and get going on increasing your home’s value today! 

If you’re ready to refinance, Fraction is here to help. We’re a first-lien refi that allows homeowners to unlock their home equity entirely online.* The Fraction Mortgage features no required monthly payments* and offers a fair interest rate. Learn more about refinancing with Fraction today.