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Will my equity loan require an appraisal?

June 13, 2024

Thinking of applying for a home equity loan to do some upgrades or renovations on your home?  You’re not alone: Bankrate reports that more homeowners have significant equity available and are ready to stay in their homes with interest rates on the rise making a purchase or refinance less appealing.  Since a home equity loan usually requires your home as collateral to secure the debt, it's common for lenders to require an appraisal of your property.

The purpose of the appraisal is to determine the current market value of your home, which helps the lender assess the loan amount they can offer you based on your available equity. The type of appraisal required can vary depending on the lender, the loan amount & type and your location.  Will an appraiser be coming out to visit and tour your home as part of your home equity loan journey?  Let’s dive into some general information about appraisal inspections to find out!

1. Traditional/Hybrid Appraisal: These are “full” appraisals and require an interior and exterior inspection of your home.  They provide a comprehensive evaluation of the property, considering factors such as its condition, location, and comparable sales in the area.

2. Drive-by Appraisal:  This type of appraisal focuses on the exterior only as far as a visit to your home is concerned.  That information is combined with an analysis of data and records relating to your property.  

3. The Desktop appraisal: No sprucing up or hiding the laundry needed, the desktop appraisal does not include any visit to your property.  Instead, an appraiser will access online and subscription resources for property information and data about your home and area homes to come to an opinion of value.  

4. The Automated Valuation Model (AVM): In some cases, lenders may use an AVM to estimate the value of your property.  AVMs use computer algorithms and statistical models to analyze data such as recent sales, market trends, and property characteristics to provide an estimate of value.

It's important to note that different lenders may have their own specific appraisal requirements, so it's best to reach out to your lender directly if you have questions about the appraisal during your loan process.  

We found moneytips to be a great source of information for learning about home equity loans and Bankrate has some great insight on the best ways to use the funds after you secure your equity loan.  

Aloft works with many lenders as part of the home equity loan process, you may meet one on the next appraisal inspection for your loan!

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