What is a refinance appraisal? How the process works

If you’re exploring refinancing your home for the first time, the appraisal refinance process might feel unfamiliar, especially if it’s been years since you bought your home.

Basically, when you apply to refinance,¹ your lender orders an appraisal through an outside professional network to determine your home’s current market value. The appraiser might come to your house and make notes on the home’s condition, any upgrades, and compare the property with recent sales in your area.

Once the report comes back, the current value of your home can directly affect loan approval, loan amount, pricing, PMI requirements, and cash-out eligibility. Here’s how a refi home appraisal works, and what you can do to help the process go smoothly.

What is a refinance appraisal?

A refinance appraisal is a professional estimate of your home’s current market value, completed as part of the mortgage approval process. A licensed appraiser evaluates your property and compares it to recently sold homes nearby to determine what it’s worth in today’s market.

It’s similar to the appraisal you likely had when you purchased your home, but might be more streamlined since there’s no purchase contract setting a baseline price. The appraiser relies on your home’s condition, any upgrades you’ve made, recent comparable sales, and broader market trends.

The appraisal is usually ordered by your lender after you apply to refinance but before the loan is finalized. While the lender coordinates the appraisal, you as the borrower will be responsible for the cost.

Why do lenders need a home appraisal for a refinance?

Your home serves as collateral for your new mortgage, so if anything happens to the loan, the bank is more likely to recoup their costs. Before a lender approves a new loan, they need to confirm what your property is worth in today’s market.

That value helps determine your loan-to-value ratio (LTV), or the percentage of your home’s value that you’re borrowing. LTV is a key factor in how lenders assess risk, and it directly impacts several parts of your refinance:

• Whether your refinance is approved
• Whether you’ll need private mortgage insurance (PMI), or if you can remove it
• How much cash you can take out in a cash-out refinance
• The interest rate and terms your lender can offer

Are appraisals always required to refinance?

Most of the time, an appraisal is required to refinance, but not always. Whether you’ll need an appraisal depends on factors like the type of loan, financial qualifications, property details, and your lender’s specific guidelines.

Based on the above factors, your lender might offer an appraisal waiver, meaning no in-person visit is required. If you already have an FHA or VA loan, government-backed refinancing programs might mean a new appraisal isn’t required:

FHA Streamline Refinance:² Available to homeowners with an existing FHA-insured mortgage, this option is designed to lower your interest rate or adjust your loan terms, but does not provide access to home equity. Because of that, it generally doesn’t require a new appraisal.

VA Interest Rate Reduction Refinance Loan (IRRRL):³ This program is available to eligible borrowers with a current VA-backed loan. It’s intended to reduce your interest rate or switch from an adjustable-rate to a fixed-rate mortgage, and it doesn’t usually require a new appraisal.

What happens when an appraisal is not required?

If your lender offers an appraisal waiver, or says no appraisal is required, it doesn’t mean the valuation process is skipped entirely. Instead of an in-person visit, the lender is likely relying on other methods to estimate your home’s value and evaluate loan risk: such as automated valuation models (AVMs), past appraisal data, public property records, and recent comparable sales in your area.

An appraisal waiver is more likely to be offered when the overall risk of the loan is lower, the home was recently appraised, or plenty of available data is available. Factors like a low LTV, strong credit profile, a home with plenty of comparable properties, and a lower-risk loan, like a rate-and-term refinance, can increase the chances of your lender not requiring an appraisal – but it’s not guaranteed.

What happens during a refinance appraisal?

The refinance appraisal process usually follows a similar series of steps between lenders, but can also vary slightly based on the type of appraisal and if there are any location-specific criteria. The typical refi home appraisal looks like:

1. The lender orders the appraisal

You don’t choose your appraiser. Lenders are required to work with independent, licensed professionals to avoid conflicts of interest.

2. The appraiser schedules a visit (if needed)

If an in-person appraisal is required, the appraiser will contact you to set up a time. Not all appraisals involve a visit (desktop appraisals and waivers don’t), but you’ll be notified if someone is coming to your home and when. Make sure the appraiser has access to all relevant areas, including garages, attics, basements, and the exterior.

For an in-person visit, the appraisal can take anywhere from several minutes to a few hours to complete, depending on the type of property, the size of the home, and whether the appraiser is doing a full evaluation or driving by.

3. The appraiser evaluates your home

During a full appraisal, the appraiser verifies your home’s size, layout, overall condition, and notable features. They’ll also look at the exterior, including the roof, siding, foundation and overall curb appeal. For exterior-only (drive-by) appraisals, the appraiser only looks at the outside of the property and uses public data to fill in the rest of the information they need.

4. The appraiser looks at comparable sales

Next, the appraiser looks at recent sales of similar homes in your area, known in real estate as comps. These are properties that are comparable in size, location, age, and features. The appraiser adjusts for any differences (like upgrades, extra rooms, or lot size) and considers what the market is doing before arriving at a final value. You can’t choose which comps are used, but you may be able to provide additional information if you request a reconsideration of value.

5. The appraisal report is completed and reviewed

The appraiser compiles their findings into a report that includes property details, photos, comparable sales, the final estimated value, and how they came to that number. Your lender reviews the appraisal as part of underwriting, and you’ll receive a copy before closing. The full appraisal process can take anywhere from a few days to a few weeks to complete, and depends on appraiser availability and how busy the market is.

What do refinance appraisers look for?

During a refinance appraisal, the appraiser looks at several factors to shape their report:

• Property basics: The appraiser confirms core details like square footage, layout, and room count. These need to be accurate because even small discrepancies can affect how your home compares to similar properties.
• Condition and major systems: The appraiser assesses the overall condition of the home, including any signs of deferred maintenance or safety concerns. They’ll also look at the age and condition of major systems like the roof, HVAC, plumbing, and electrical. Normal clutter or everyday mess doesn’t impact value, but visible damage or needed repairs can.
• Upgrades and renovations: Improvements can support your home’s value, especially if they’re recent and well-documented. However, upgrades don’t always translate to a dollar-for-dollar increase. The appraiser considers whether your updates align with what buyers expect in your area and price range.
• Comparable sales and market context: Beyond selecting similar recent sales, the appraiser evaluates how your home fits within the broader local market. This includes looking at pricing trends, inventory levels, and how quickly homes are selling. Adjustments are made to account for differences between your home and comparable properties, helping arrive at a value that reflects current conditions.

Types of refinance appraisals and alternatives

Lenders may use different types of appraisals, or even alternative valuation methods, depending on your loan and qualifications. Here’s how the most common options compare:

• Traditional in-person appraisal: A licensed appraiser completes a full, on-site evaluation of your home, including the interior and exterior. This is the most detailed and widely used type of appraisal.
• Desktop appraisal: The appraiser estimates your home’s value using public records, property data, and recent sales, without visiting the property.
• Hybrid appraisal: A third party collects property data during a brief on-site visit, or the homeowner provides photos and data. Then a licensed appraiser reviews that information remotely.
• Exterior-only, or drive-by appraisal: The appraiser evaluates the home from the outside only, then uses neighborhood characteristics and available data for the remainder of the report. This was more common during the pandemic.
• Appraisal waiver (value acceptance): In some cases, the lender may not require a new appraisal at all. Instead, they use existing data and a strong borrower profile to estimate the home’s value and mitigate risk. Approval depends on your loan details, property, and lender criteria.

How much does a refinance appraisal cost?

A home appraisal can cost between $375 – $3,000, but the price will depend on several factors:

• The type of appraisal your lender requires
• The location of the home: Some areas have higher costs, while more rural homes can be more challenging to access and find comparable properties.
• The home’s features: The more unique the property, or the more features it has, the more time it can take to determine a fair market value.
• The size of the home: A single-family home appraisal will typically be on the lower end of the cost spectrum, and a multifamily property will usually be on the higher end. The larger the size, the longer the visit, and likely the higher the cost.

After you’re preapproved, your lender will estimate closing costs and include them in the loan agreement. No later than 3 business days before closing, your lender will send you a Closing Disclosure that will outline the final closing costs.

How to prepare for a refinance appraisal

While you can’t fully control the market value of your home, a little preparation for a refinance appraisal can help make sure your home is evaluated as accurately as possible.

• Make sure all areas are accessible: Ensure the appraiser can easily access every part of your home, including basements, attics, garages, and outdoor spaces. Make sure pets are contained as well, as limited access can delay the process or result in incomplete information.
• Complete minor repairs: Fix small but noticeable issues, such as leaky faucets, damaged fixtures, broken safety features, or missing handrails. Addressing basic maintenance items can help avoid any discrepancies around the home’s overall condition.
• Gather documentation of upgrades: Prepare a list of recent improvements, including renovations, system upgrades, or notable repairs. Include dates, costs, and any permits if you can. This helps the appraiser account for updates that may not be immediately visible.
• Tidy up the exterior: Basic curb appeal, like mowing the lawn or cleaning up messy areas, can help with the home’s presentation. While cleanliness doesn’t impact value directly, it can make it easier for the appraiser to assess the property.

What if my refinance appraisal comes in low?

A lower than expected appraisal doesn’t automatically mean your refinance is denied, but it can affect your loan options.

Start by reviewing the appraisal report for errors or missing information, like incorrect square footage or missed upgrades. If you believe the value is inaccurate, you may be able to request a reconsideration of value from your lender.

If the appraisal still comes in low, your lender can help you understand which options are available based on your situation, such as:

• Adjusting your loan amount
• Bringing cash to closing to lower your loan-to-value ratio
• Waiting to refinance until market conditions change

FAQ about refinance appraisals

How long does underwriting take after a refinance appraisal?

Underwriting after a refinance appraisal can take anywhere from a few days to a week or two. Delays can happen if anything on the appraisal report raises questions or additional documents are needed. The entire refinancing process typically takes around 30 – 45 days.

Can a refinance be denied after the appraisal?

Yes, a lender may deny a refinance application if the appraised value of the home is lower than the amount you owe on the mortgage or the requested loan amount. Any issues that occur during underwriting can also cause delays or the refinance to be denied.

How clean does my house need to be for a refinance appraisal?

Your house doesn’t need to be spotless for a refinance appraisal, but ensure your home appears well taken care of before the appraiser visits. While not necessary, a tidy house and exterior helps the appraiser see that the house has been well maintained and is in good condition where it counts.

Who pays for a refinance appraisal?

The borrower pays for all costs associated with a new home loan, including the appraisal. The fee will either be paid upfront, part of your closing costs, or sometimes can be rolled into your new loan.

The bottom line: A refinance appraisal helps everyone understand a home’s value

A refinance appraisal is a common part of the refinancing process because lenders need to know your home’s current market value before approving a new loan.

That number determines your loan-to-value ratio (LTV), which can affect whether your refinance is approved, the terms you’re offered, whether PMI is required, or how much cash you may be able to take out.

While you can’t control market conditions or comparable sales, you can prepare your home and any documentation ahead of the appraisal and understand your options if the value comes in higher or lower than expected.

If you’re ready to start the refinancing process, Rocket Mortgage has you covered.

¹ Refinancing may increase finance charges over the life of the loan.

² Rocket Mortgage is not acting on behalf of FHA or HUD.

³ Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.