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Should You Upgrade Your Home Before You Refinance?

So you’re thinking about refinancing your home mortgage. You know one of the major factors in determining how good a deal you can get will be the dreaded appraisal process.

The appraiser is holding a lot of power over your future, so it’s wise for you to make sure that your home is seen in the most favorable light.

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This likely means that some sprucing up is necessary before you start the refinancing process. And if you’ve done a lot of extensive upgrading already, you absolutely need to make certain that your hard work and monetary investment is fully reflected when the appraiser makes a determination.

And believe it or not, failing to perform necessary upgrades and repairs prior to the refinancing process is something that millions of homeowners fail to do. It’s a shocking, and costly, oversight.

Homeowners who are refinancing, but don’t intend on selling or otherwise vacating the premise often think they don’t need to bother with landscaping, painting and similar tasks. They may be refinancing to help with finances and thus avoid the upfront expenses inherent in upgrades and repairs.

If you think like these people, it’s going to cost you money. Maybe a lot of money.

It’s important to remember that the point of the appraisal process is for the lender to make sure that the house is valuable enough to serve as appropriate collateral on the loan. A home that has fallen into disrepair is not only going to be perceived as less valuable than well-maintained comparables, but it also could be an indication to the lender that the homeowners themselves are a risky investment.

This situation is further complicated in instances where a potential refinancer is looking to replace an older mortgage. If you bought at the wrong time, it’s still possible that your home could be worth less than what you paid for it. And if it’s close, failing to conduct those repairs and improvements you’ve been planning could seal your doom.

Having your loan rejected because of a low appraisal is a real bummer. And it’s costly. You’re going to be stuck with the upfront fees -- including the cost of having that appraiser come and deliver the bad news -- either way. That’s money that could have been invested in the very repairs and improvements you thought were too expensive!

Naturally, you might not be able to tackle every item on your home improvement wish list before the appraiser visits. And not every home improvement will result in the same boost in appraiser value.

But one thing is for certain, taking a frank assessment of your home’s condition and making some level of investment into repairs and upgrades should be considered a necessary step in the mortgage refinancing process.

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