Mortgage loan refinancing is often a popular and beneficial option for homeowners. However, it's also a decision that should never be made lightly or without considering all your options.

After all, your home is one of your greatest assets and you cannot afford to make mistakes. With that being said, today's housing market has homeowners running to lenders for refinancing. If that's you, you may have questions about appraisals.

According to The Wall Street Journal, in 2020 alone, there were as many as eight million refinances. Of that eight million, there was nearly $5.3 billion saved in the last 10 months. This is where home appraisals can get you a piece of that pie — the higher the appraisal, the more you receive. Fortunately, low appraisals are pretty uncommon, coming in lower than expected only 8% of the time (and always open for renegotiation!).

Here's everything you need to know about appraisals, including what you can expect when you refinance through a government program. 

The Difference Between an Appraisal And a Home Inspection

While many homeowners tend to mix up home appraisals with home inspections, they're actually very different.

• A home inspection is only required during the sale of your home, not refinancing. It is made to ensure the buyer is made aware of how structurally sound the home is prior to purchasing.
• An appraisal is available for both resale and refinancing. It's used as a means of determining the market value of the property. 

What Your Appraisal Results Mean For You

If your home appraisal results come back higher than you anticipated, you can expect to tap into more equity or receive better terms. On the other hand, if the appraisal is much lower than expected, this can make your cash-out refinance less than you need for your goal for the funds. In worst-case scenarios, it can even lead to you not being approved for refinancing by your lender.

How to Prepare For an Appraisal 

A good way to prepare for appraisal costs and ensure you receive a more valuable result is to leave a list out of some of the major upgrades you've made to your home recently. There are cases where these big improvements go unnoticed and leave homeowners with a lower appraisal than they deserve.

This means you’re missing out on equity and could still end up paying more than what you should.

For instance, appraisers should know if you've recently replaced your roof, updated your plumbing with more efficient (and albeit expensive) materials/equipment, or remodeled spaces in your home with more expensive replacements like granite countertops and a new garage door.

Appraisals Are Usually Required, With Exceptions

In most cases, an appraisal of your home is required to take advantage of refinancing. This is true for most mortgage loans, including government-backed refinancing, and especially true for homeowners interested in cash-out refinancing. In these cases, your goal isn't always to lower monthly payments but to use your home's equity to fund home improvements, debts, education, and more.

If your lender decides not to require an appraisal of your home, the chances are that they don't think the refinance loan is high risk (they're confident they'll get their money back) and are likely comfortable accepting your home's sale price as its estimated value. These circumstances are rare. On the other hand, some exceptions may come into play.

First and foremost, there are government-backed loans that don't require an appraisal if your original loan was with the same financing type you plan to refinance with. For example, a VA-to-VA no cash-out refinancing loan. There are also refinancing options that offer 'streamlined' mortgage refinancing loans that promote no appraisals. Although these loans often require great credit, at least six months (time varies by loan) with your original loan, and your current loan has no delinquencies.

Appraisal Costs For a Mortgage Refinance

Homeowners pay on average $341 in appraisal fees (with a typical range between $312 and $408) on a single-family home, according to national averages reported by HomeAdvisor. For a multifamily home, homeowners often report paying from $600 to $1,500 for a home appraisal. It's important to note that while these numbers do represent the national average, they will change according to factors like your location, the size and condition of your home, and how much work the appraiser will have to do.

Appraisal fees and costs will also vary by the appraiser you work with, although you do not get to select one yourself — the lender selects the appraiser out of a panel. This is another reason it's so important to ensure that the lender you're refinancing your mortgage with is the right choice for you.

Not to brag, but it could be us. Just saying.

The whole point of refinancing your mortgage is to improve your finances overall or gain more flexibility for future spending, so it's only fair that you get the most out of your experience. For this reason, it may be in your best interest to consider using a Refinance Calculator to get a snapshot of what you can expect when you refinance with that lender. 

Get Appraisal Credit With RefiNow

More often than not, a home appraisal can turn out to be a great option for homeowners. This is especially true in today's housing market, where home values are well above what they've been. The same can be said for refinancing in today's real estate market since interest rates continue to be at a historical low.

This means that even if you don't need the extra funding for your home or your child's education, you can take advantage of refinancing your mortgage to benefit from a lower interest rate than your existing loan (meaning lower monthly payments that will be locked in for the rest of your loan term!).

If you're worried about your options due to your credit, it's important to know that RefiNow is a government program that targets homeowners with not-so-perfect credit. Better yet, the program also offers a $500 credit towards your appraisal.