Can Appraised Home Values Decrease Mortgage Rates

by Shannon in Reno, NV and by Janice in Las Vegas, NV

Ask Kate if you'll get a lower mortgage rate when your home's appraised value is higher than expected: Shannon is refinancing her mortgage and got a nice surprise in her loan-to-value ratio! Her home appraised for $30,000 more than she expected. Now she hopes for a better interest rate than the one she locked in.


Janice is struggling with her big-box nationwide lender who tells her there are no do-overs in loan modification. She asks for options to avoid foreclosure.

Can New (Higher) Value of Home Lower My Interest Rate

By Shannon in Reno, NV
Can New (Higher) Value of Home Lower My Interest Rate

Kate,

We are refinancing our mortgage with the same mortgage company because they offered no closing fees.

Our current locked rate is 4.75% down from 4.99% on our current loan, with the assumption our house was valued at $300,000.

The appraisal came back at $330,000. We bought it for $287,000.

Can the new value of home lower the interest rate?

Or what does higher appraisal than originally thought change in the numbers, if any?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Can New (Higher) Value of Home Lower My Interest Rate

Hi Shannon,

Mortgage lenders use a ratio, loan-to-value or LTV, to determine qualifying criteria.

If you were a home buyer, your loan-to-value ratio would be based on the loan amount divided by the purchase price or appraised value, whichever is less. So an unexpected increase in the appraisal would mostly confirm that you negotiated a good deal but would not determine a lower LTV.

Loan-to-Value for Refinancing

But since you are refinancing your home, there is no purchase price to add to the equation.

So the loan-to-value ratio will be calculated by dividing the loan amount by the appraised value. If this unexpected increase to your appraised value lowers your loan-to-value sufficiently, your rate could go down.

For example, a borrower with a 65% loan-to-value usually can get a lower interest rate than his neighbor with 95% loan-to-value, even if they own comparable homes.

In other words, the lower the loan-to-value, the better chance you have of getting a lower interest rate (and avoiding private mortgage insurance).
Go here for more on loan-to-value: Who Broke the Mortgage Loan-to-Value Calculator.

Loan-to-Value Changes After Locking Your Mortgage Rate

But (don't you really wish that word didn't exist) because you have already locked in your rate, you will need to pull out your written mortgage rate lock agreement to see if your terms allow for rate adjustments after locking.

Those who follow my website know what I'm about to say... You must learn to ask qualifying questions before allowing a lender to process your loan application. In other words, when you shop for a mortgage company, do more than ask what their rate is.

Interview the lender! Qualify the lender! Especially regarding lock procedures!
For a remarkable list of questions to ask about locking interest rates while you're shopping for a mortgage, go to Low Mortgage Payments: Question Your Way to Success.
Best wishes,

Ask Kate

Need Options to Keep Our Home Out of Foreclosure

By Janice in Las Vegas
Need Options to Keep Our Home Out of Foreclosure

Hi Kate,

Our mortgage lender, Bank of America, states that they gave us a loan modification in March of 2011 so we can't have another one.

We are currently 7 months behind on our mortgage payments and have been underwater since 2007. My husband has been working full-time since January 2015 and I have been at my job since 2000.

Last night I called Bank of America to find out the current status of our loan modification after our required documents had been sitting at their Texas office location for nearly 4 weeks. I was told that the Lende (a German Bank) is not going to offer us a loan modification, based on the fact that we got one from them in 2011 but we can file an appeal.

Yet, all they did in 2011 was extend the interest-only payments due date from 2012 to ending in 2016. They have still left us in an adjustable rate mortgage that will still go up to 6.5%. (This has always been our loan structure - 3 payment option plan at a 2.5% interest rate until 06/2016.)

I have been told by a modification mediation company (I knew not to give them any money) that we qualify for a HAMP tier 2 loan modification.

Also we have never filed for bankruptcy. I am contemplating this as a possible option in order to fix our credit and keep our home if that's an option.

Another serious option would be to hire a lawyer to keep our home based on the fact that we owe $229,000 and that it's currently worth only $110,000.

I would like to know my options. Yes, we live in Nevada.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Need Options to Keep Our Home Out of Foreclosure

Hi Janice,

Excuse me while I whine. A major difficulty and stumbling block to loan modifications is that homeowners cannot shop lenders, ask qualifying questions, and then choose who they'd like to do business with.

Nope, instead there is only one choice and that's the lender who unbeknownst to you, bought your mortgage.

Moving on from my whine-fest, let's address your situation.

I'm not sure the relationship between Lende and Bank of America but if I had to guess, I'd say BofA originated your mortgage and stayed on as loan servicer after Lende purchased it. So Lende is calling the shots. Maybe.

HAMP Tier 2 and HUD-Approved Housing Counselors

Either way, you need to get to the bottom of this by asking specifically why you have been determined not eligible for HAMP Tier 2. (By the way, I'm happy to hear you did not toss money away on a modification mediation company.)
Keeping in mind the banks are not sterling, read about Whistle Blowers and HAMP Loan Modification Scheme Exposed at Major Bank.
If you can't get an acceptable answer, call a HUD-approved housing counselor at 888-995-HOPE (4673) and ask them to intervene on your behalf. While you're in the automated portion of the phone call, say "MHA Help" to escalate your question.

Best wishes for an affordable payment,

Ask Kate

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