Should I pay down my principal mortgage balance to refinance or upgrade my home for a better value?

This depends on what your long-term goals and objectives on your home. Let’s say the property as a primary residence, and you don’t plan to move anytime soon. Best to start the refinance process, and get the appraisal back. Once the appraisal comes back, and you know the value of your property then it’s just a function of paying down the principal balance to refinance the mortgage to obtain a lower payment and/or interest rate or upgrade the home for later on.

Let’s back up a second. There is a school of thought that doing upgrades on the home such as redoing the bathroom, fixing exterior siding, doing minor cosmetics will improve home value, while they might look house more appealing, they will not necessarily increase your property value for the purposes of successfully completing a refinance. For most projects such as a patio, landscaping, will help a listing price to sell your home, but typically, won’t do much for home valuation for the purposes of an appraisal. Expect $.30-$.40 on the dollar for every dollar spent on your home improvement project.

Some exceptions that will increase your valuation for the purposes of completing a refinance

Anything that increases the square footage of your property will almost certainly improve your value. This means doing addition on your home that makes the square footage larger such as an additional bedroom, expansion of the living room, an additional bedroom, an additional garage, home improvement upgrades that are specifically tied to the legal description of your property. While this is true, majority of the weight and appraisal is given towards the following factors:

  • sales of other properties in & around your home within a half-mile radius of your home
  • specifically “solds”, although lately much weight has also been given the current listings as they are another barometer of value
  • adjustments based on lot size square footage bedrooms and bath to what is listed and sold

In other words, if you have the additional cash and you think you’re valuation might be tight based upon having a conversation with your mortgage company, best to make sure the property doesn’t have any health and safety hazards which is an issue for any mortgage appraisal.

Steps for loan remortgaging success

Order the appraisal, get the valuation, make sure the loan to value is there and then determine loan structure with a sharp loan professional. A better use of one’s dollars in this credit climate is typically, not always, but in most cases best allocating for reducing the cost of the mortgage over time by virtue of a lower loan amount or lower interest rate. However, if interest rate, loan amount, and payment are not as important as upgrading the home for enjoyment purposes, then by all means complete the refinance with as little cost as possible and then upgrade the home with those dollars. It’s not a good idea to try to upgrade the home first by doing light cosmetic stuff unless the upgrades specifically have to do with the legal valuation of the property, * remember large-scale stuff, additional bedrooms and bathrooms square footage, not cosmetics.

If you would like to get a complimentary refinance mortgage rate quote, start your refinance research online or contact, directly.

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