Cash-out refinance after rehab

[Rahul D.]

Hi All,

Last year I purchased a home that was in good condition but very dated in term of finishes. Since then, I've spent a substantial amount of time and money in remodeling the home; essentially a full rehab of the home with high end finishes, plus the addition of a full bathroom and finishing of the basement.

At time of purchase, I employed a broker to help secure the mortgage. And now that the property is completely updated, I am looking for a cash-out refinance. I am hesitant to use the same brokerage again as they had appraised the home at about $40k below market value when I purchased it last year. Although that was a favorable appraisal in a purchase situation, as the home was appraised close to purchase price (which was under market), I currently want to ensure that the property is now appraised at the highest possible price for the cash-out refi.

I wanted to get some insight as to whether you all think my concern is warranted. This broker is offering me the best rate, however I don't want to jeopardize my max cash-out value for a slightly favorable rate. I would appreciate any thoughts and insight. Thanks!

[Jeff Dulla]

@Rahul D. in fairness to your broker, that’s the whole point - this isn’t supposed to be a process you or he/she can manipulate. There is no lender that will provide the “highest value” possible. It is supposed to be an unbiased, third party, assessing fair market value. The government has gone out of there way to make regulations that stop the manipulation of value.

That said, you can do a great deal by having very solid, comparable sold homes ready to go for the appraiser that comes. If they still manage to miss the mark, have a trusted local realtor put together comps and go with a lender that will allow for you to rebuttal your appraisal with comps. You are still subject to the variability of the process, no matter the lender.