The appraiser is coming to our house tomorrow to give us a value for the house. The magical number in this man’s pocket drastically affects the costs of refinancing the house. In case you’re not familiar, any time you apply for a loan or a refinance (which is essentially, a new loan) there are a bunch of costs associated with it, things like:
- Broker/underwriter’s fee
- Title search
- Credit report
- Prepaid items (insurance, taxes, etc that are paid out of the mortgage)
Now, in our case, some of these items can be “rolled into” the loan so you don’t have to pay them out of pocket. In order to do so, however, your house has to appraise for enough to cover the amount that you owe on the loan *and* the closing costs while still leaving 5% of equity in the home.
Since mine is a relatively young mortgage, less than 10 years, and because you pay mostly interest costs on the front end of the loan, there’s not a ton of equity built up yet. So if the house appraises for less than what we’re estimating it will, it means fewer closing costs can be rolled into the loan and more has to be paid out of pocket (and vice versa). Property values still haven’t recovered from the housing market crash so we really don’t know what this number is going to be.
Secretly, I’m hoping it appraises for what I bought it for so I can feel like this whole buying a house endeavor has not been (literally) a negative investment.