What Do You Owe, and What’s It Worth?

by Alex Stenback on March 5, 2009

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Before the possibility of refinancing under the *Making Home Affordable” program (the new rules were announced yesterday) gets your animal spirits racing, I want to call attention to question #4 from the four part eligibility test:

Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

You’ll know what you owe (god I hope so), but what’s it worth? That’s a tougher question.

Your tax assessed value is mostly worthless as a guide.  What you paid for it means almost nothing.  None of your neighbors have sold recently, and even if they have, you don’t know the terms of the sale.

So what then?

Leaving aside the obvious fact that the only way to really know is to put it on the market and sell it, how does one get an idea of their home’s current value? 

You could get an appraisal.  But that will cost you $300-$500, and is not a risk-free proposition.  You might pay to learn that you can’t refinance.

So what then?  My advice would be to do two things:

1.  Stop by the Minneapolis Area Association of Realtors website and check out The 100, which is a breakdown of market stats 205 inidividual communities.  Do a little research on the market trends in your hood.

2. Call a realtor you know and/or trust and have them perform a market analysis on your home.

Then, after taking those two steps, you can answer yes to question #4, then it is time to give your lender a jingle.  If you can’t get through, or aren’t happy in any way with how things are going, my contact info is in the upper right hand corner.
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*The program to which I refer allows refinancing of mortgages that are between 80-105% ”Loan-to-Value”.  It occurs to me that some may not know how to calculate this.  It is simple.  1.  Take your loan amount.  2. Divide it by the estimated value of the property.  3. Move the decimal two places to the right. 4.  Viola, that is your estimated loan-to-value, and if that number is between 80 and 105, you are “in the window,” as it were.

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