No-Appraisal Refinancing


DEFINITION of 'No-Appraisal Refinancing '

A type of mortgage for which the lender does not require an independent, professional opinion of the home’s value as a condition of extending a new mortgage with more favorable terms to replace an existing mortgage with less favorable terms. No-appraisal refinancing is available for Federal Housing Administration streamline refinances, Veterans Administration streamline refinances (also called Interest Rate Reduction Refinance Loans), U.S. Department of Agriculture streamline refinances and Home Affordable Refinance Program refinances.

BREAKING DOWN 'No-Appraisal Refinancing '

Homeowners typically choose no-appraisal refinancing when they would not qualify to refinance if the lender did perform an appraisal. Homeowners could find themselves in this situation if their home’s value has declined since they purchased it and they now owe more on their mortgage than the property is worth.

Otherwise, there are several reasons why a homeowner would likely be better off refinancing with a loan that does require an appraisal. If they are currently paying private mortgage insurance (PMI) because they made a down payment of less than 20%, an appraisal that shows the home’s value has increased since the date the existing mortgage was taken out could allow the homeowner to avoid PMI on the new loan. That would happen if the increase in market value plus the amount of principal they have paid down have increased their equity to 20% or more. This increase in equity can also give borrowers a lower interest rate since a lender will consider them lower risk; borrowers with more equity are less likely to walk away from their homes.

Many homeowners are not eligible for one of the four no-appraisal refinance programs; taking a chance on an appraisal may be their only shot at refinancing. All the same, there is no guarantee that the appraiser’s opinion of the home’s value will be high enough to allow the borrower to refinance or to eliminate PMI. Borrowers who risk a refinancing that requires an appraisal must be willing to take the risk of paying a several-hundred-dollar fee with no guarantee of achieving their goal.

  1. USDA Streamlined Refinancing

    A mortgage-refinancing option offered by the United States Department ...
  2. Refinancing Risk

    1. The risk that an early unscheduled repayment of principal ...
  3. Corporate Refinancing

    The process through which a company reorganizes its debt obligations ...
  4. Encumbrance

    A claim against a property by a party that is not the owner. ...
  5. Equity

    Equity is the value of an asset less the value of all liabilities ...
  6. Chattel Mortgage Non-Filing Insurance

    An insurance policy covering losses that result from a policyholder ...
Related Articles
  1. Credit & Loans

    6 Questions To Ask Before Refinancing Your Mortgage

    Refinancing can improve your short-term cash flow while also increasing your long-term net worth.
  2. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  3. Home & Auto

    How To Keep Costs Low When Refinancing Your Home

    With interest rates still being relatively low, now is a great time to capitalize on refinancing your home. Be aware of what fees are involved in a refinance, and how to keep these costs low.
  4. Home & Auto

    Re-Amortizing Or Refinancing Your Home

    Re-amortization is a lesser known alternative to refinancing when it comes to dealing with your mortgage.
  5. Insurance

    What is a Force Majeure?

    A force majeure clause frees both parties in a contract from fulfilling their obligations in the event of some catastrophic or unexpected occurrence.
  6. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  7. Investing Basics

    Tiny House Movement: Making Market Opportunities

    The tiny house movement throws all assumptions about household budgeting and mortgage management out the window, and creates new market segments too.
  8. Investing

    Where Should I Keep My Down Payment Savings?

    While saving up for a down payment, where should you keep your money. A bank? The stock market? It all depends on your timeline.
  9. Credit & Loans

    Questions To Ask Your Mortgage Lender

    When buying a house, avoid nasty surprises by asking the right questions about your mortgage lender's qualifications and the mortgage process.
  10. Home & Auto

    The Most Expensive Neighborhoods in Manhattan

    Understand why Manhattan has some of the priciest residential real estate in the world. Learn about the top four most expensive neighborhoods in Manhattan.
  1. How do I calculate how much home equity I have?

    Even though it is normally assumed most people know their home equity, many are still confused about the topic. It is an ... Read Full Answer >>
  2. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  3. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  4. What are the typical requirements to qualify for closed end credit?

    Typical requirements for a consumer to qualify for closed-end credit include satisfactory income level and credit history, ... Read Full Answer >>
  5. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  6. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!