What Is No-Appraisal Refinancing?
No-appraisal refinancing is a type of mortgage that replaces an existing loan on a residence where the lender does not require an independent, professional assessment of a home’s value to extend a new mortgage. A home appraisal determines the fair market value of a property and helps the lender determine that borrowers are not asking for more money than a home is worth.
Private lenders, such as banks and mortgage companies, commonly require appraisals to refinance. However, the lender may waive the refinance appraisal if borrowers have a Federal Housing Administration (FHA), Department of Veterans Affairs (VA), or U.S. Department of Agriculture (USDA) loan.
- No-appraisal refinancing replaces an existing mortgage on a residence and does not require a new home value assessment.
- Homeowners typically choose no-appraisal refinancing when they are unlikely to qualify for a new standard loan.
- No-appraisal refinancing is available from government agencies, including the Federal Housing Administration, Veterans Administration, and the Department of Agriculture.
Understanding No-Appraisal Refinancing
No-appraisal refinancing is good for homeowners but risky for lenders. Homeowners typically choose no-appraisal refinancing when they are unlikely to qualify for a new loan that requires an appraisal. No-appraisal refinancing is available from several government sources:
- The Federal Housing Administration (FHA) streamline refinance
- The Veterans Administration (VA) streamline refinances or interest rate reduction refinance loans
- The U.S. Department of Agriculture streamline refinancing
- Fannie Mae's "RefiNow" program and Freddie Mac's "Refi Possible" program
Upfront fees on Fannie Mae and Freddie Mac home loans changed in May 2023. Fees were increased for homebuyers with higher credit scores, such as 740 or higher, while they were decreased for homebuyers with lower credit scores, such as those below 640. Another change: Your down payment will influence what your fee is. The higher your down payment, the lower your fees, though it will still depend on your credit score. Fannie Mae provides Loan-Level Price Adjustments on its website.
Benefits of an Appraisal
Borrowers may be better off refinancing with a loan that requires an appraisal. For borrowers paying private mortgage insurance (PMI) due to a down payment of less than 20% of the purchase price, an appraisal may show the home’s value has increased and could void the PMI requirement on the new loan. The equity increase can also earn a lower interest rate on the refinanced mortgage.
Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).
When Is a Mortgage Considered "Underwater?"
A mortgage is considered underwater where more is owed on the mortgage than the property is worth. If the borrower defaults on the mortgage, the lender will not be able to sell the property for the balance of the outstanding mortgage and incur a loss.
What Is Streamline Refinancing?
Borrowers with FHA, VA, or a USDA loan may qualify for a Streamline refinance that does not require appraisals.
Why Do Borrowers Refinance Their Mortgage?
A refinance can help a borrower change the terms of an existing loan and revise the interest rates, payment schedules, or other terms.
The Bottom Line
No-appraisal refinancing is available from government agencies, including the Federal Housing Administration, Veterans Administration, and the Department of Agriculture. Refinancing a mortgage can help a borrower change the terms of an existing loan and revise the interest rates and payment schedule.