How to handle a lower home value when refinancing your mortgage

When you apply to refinance your house one of the risks you inevitable agree to is your application is subject to a loan to value. Here is how to handle a situation where you value is beneath initial estimates…

One of the things you must have you when refinance is a loan to value determined an appraisal. There is one exception to the rule on a conventional mortgage it is possible on a case-by-case basis only the lender might get what’s called a PIW or an appraisal waiver that allows them to do your refinance without needing an appraisal based on automated underwriting results. This would require a credit check and providing supporting income documentation

If you are desiring to refinance your house and your house does not appraise for what you think it is worth most mortgage companies will just say that’s the value and leave it at that forcing, you to come up with additional options. Here’s what a good lender will do for you. They will go and find and or request from their appraisal company additional comparable to do a rebuttal of the opinion of value. Not always, but there are some instances where you might be able to get your value changed based on additional supporting documentation such as work that you did to the property or other comparables that were not originally used in the first appraisal report.

Even a change by as little as $5-7k in some cases can mean the difference between bringing in several thousand dollars to close of escrow or being able to finance those monies in the loan amount.

Other alternatives may include:

  • subordinating a second mortgage
  • changing loan programs
  • going from having PMI to having reduced PMI or no monthly PMI via a prepaid annual mortgage insurance premium
  • increasing cash to close
  • raising a credit score
  • borrowing less
  • getting a co-signor
  • paying off another debt

Lastly, paying down your principal balance to represent the needed loan to value that you need is an alternative. This is specific money being directed into your principal balance resulting in a lower loan amount which also would result in lower cost loan as you’re financing less money over the total term of 360 months for example.

 

If you’re unable to complete any kind of a net tangible benefit refinance, cancel the loan. There is a silver lining. The silver lining is that at least with the appraised value you know the value that you have and more importantly how much more value you’ll need in your property measured over the course of time to complete the refinance in the future. Let’s say you need your needs to appraise for $600,000 and the value that you have is $580,000 you know that $20,000 more of equity is what you will need. Based on home sales data in your market that could be an attainable number in 6 to 8 months based on market forces.

Looking to refinance your home for low cost? Get a fast quote now.

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When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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