Home loan modifications and mortgage refinancing are not always the same thing. For instance, a borrower may be a first time homeowner who has opted for a refinance to get lower interest rates and payment amounts through the use of an ARM. However, this is just one scenario. There are many other scenarios where both a borrower and a lender may be in agreement that a modification or refinancing to a fixed rate mortgage is needed. This is where the concept of what is revaluation comes into play.
First, the mortgage company will want to know the value of the property that the borrower is selling. This can be done through a home appraisal. Second, the lender may want to know the appraised value of the property that the borrower is financing. Again, this can be done through a home appraisal.
The third scenario is where the revaluation is being requested because the borrower is behind on their mortgage. In this case, the revaluation will be used to determine what is owed on the property. If it turns out that the amount of the outstanding balance is more than the value of the property, then a mortgage refinancing may be necessary. The last option is to ask for a revaluation because the borrower does not qualify for the current interest rate or payment amounts, or perhaps because the value of the property has dropped.
What is a revaluation? Essentially, the lender or agency will do the work to determine what the fair market value of your home is. They will make this determination according to all the information they have about the house. You can negotiate a deal with this type of lender, if you understand what they are looking for.
When should you use a revaluation method? You can use this method if you have fallen behind on your mortgage and your current loan terms are not sustainable. It is possible for you to refinance again and get into a better payment plan, but if you default on your loan again, the lender will want to foreclose. A revaluation will help your situation by helping the lender to see what the fair market value of the house would be. You can then negotiate a better mortgage terms.
How do lenders determine the market value of a home? Generally, the lender will take several factors into consideration before coming up with a final number. Some of these factors include the location of the home, the condition of the home, the expected selling price of similar homes in your neighborhood, and the homeowner’s credit rating. The last factor, the homeowner’s credit rating, can take up to 6 months to determine. Once the evaluation is complete, you will know what your loan obligation will be.
The amount that you are allowed to borrow in a revaluation process will also be determined by various factors. If your mortgage had a balloon payment at the end of the term, you may be able to borrow more than the balance remaining on the property. Also, you may be able to borrow more if you have a good credit score and home equity. If you have experienced negative equity, you may also be able to receive lower payments and interest rates. Your lender will help you determine the appropriate revaluation method.
Although it can be confusing and time consuming, the revaluation method is an excellent way for you to make sure that your mortgage fits your current and future financial needs. Knowing what your obligation will be and whether or not the value of the property will increase or decrease will give you a better idea of how much money you should expect to earn on your mortgage. It will also allow you to determine if you need to make any repairs to the property before you begin reaping the benefits of re-evaluation. While it can be an involved process, the peace of mind it provides allows you to get on with enjoying your investment.