Lake Property Appraisal Upcharge?!?!

August 27, 2020 9:59 AM

We are attempting to refinance our lake house. The mortgage processor told us there will be an extra $395 upcharge on the appraisal because it's a lake property. In the 18 years we've owned the property (and 3 refinances), I've never heard of such a thing. Does this sound normal? Do I walk away, even though we *could* afford the extra $395 - it's just the principle!
posted by sarajane to Work & Money (4 answers total)

Can you shop around for your own appraiser? (Your Good-Faith Estimate form will list which services you can shop around for and which you have to use their person for.)
posted by mskyle at 10:04 AM on August 27, 2020

You can also push back on the mortgage processor. "Is this a new policy because of COVID? This property has been appraised 3 times for refinancing and I have never heard of such a thing." See what they say. There are a lot of new "policies" right now taking advantage of the pandemic, and this might be related to that. Or it might not. Ask!
posted by phunniemee at 10:07 AM on August 27, 2020 [2 favorites]

There have been a few stories about this in the news in Quebec and Ontario about this recently. Some lenders have started to take notice of increased risk in flood zone designations. There's also more pressure on seasonal lake houses being used as all-year residences with urban growth and rising property prices.

Is your lot in a flood zone? In some places, lakefront automatically means flood zone. It may have been reassessed recently, and that's maybe why previous re-fis didn't include it.
posted by scruss at 10:22 AM on August 27, 2020 [4 favorites]

I would simply see if other mortgage brokers or banks offer a cheaper refinance. To me, it doesn't matter if I pay money in the appraisal, origination fees, or anywhere else on the refinance [*]. If the cost of me getting the cheapest refinance is I pay $395 extra on my appraisal, it makes sense to me to pay it. Correspondingly, if this mortgage is refinance is more expensive than others, it doesn't matter to me why it's more expensive - just that it is.

Total all costs to your refinance and compare them that way. If the number is too high, just respond to the broker to make the refinance cheaper. How they do so is not really your problem [**].

[*] Caveat: some fees are tax-deductible in certain cases, which can matter slightly - but only if you itemize your taxes.
[**] Caveat: getting an appraisal refunded if the refinance falls through is really difficult, so if you are worried about the refinance falling through, you may want to keep the appraisal cheaper. However, the actual appraisal cost doesn't matter if the refinance completes.
posted by saeculorum at 10:32 AM on August 27, 2020 [4 favorites]