We are about 50% done with a major renovation project on the interior of our 3br, 1bath home that has been progressing slowly. All work has been done myself, at my own pace. (very supportive wife!)

We have the opportunity to move from our current interest rate of 6.25% to a rate of 4.5%. We bought the house two years ago for less than it appraised for by the VA. Property values are not quite what they were when we bought, but we have already invested nearly $25k in home upgrades (bath, kitchen, living room, property clearing). So our current equity standings should be pretty good.

Does a refinance require re-appraisal? If so, will the renovations NOT being complete actually hurt us on value, or will it be set to completed value? One thing that will hurt us in the time being is that we have deleted the 3rd bedroom, releasing it to a grand dining area with intentions of adding on a master suite later (to 3br, 2 bath).

Side kicker, as of 31DEC08, I am officially unemployed due to company layoff. Bill to income ratio is still in the green with my wife's salary, but I don't know what effect my unemployment may have on the refi, if any. I'm almost afraid to call the bank! But dropping from 6.25 to 4.5 will hopefully cut our monthly note almost in half.

Any advice?

1) Generally all refi's require a new appraisal and reflect the value of the home as it stands.

2) While you stated that you were still "in th green"... Besides one's FICO score the other big determinent in one's eligibility for a mortgage is "Total Debt Ratio". This is calculated as follows... monthly mortgage payment (with taxes and insurance) PLUS all other debts ( credit card, student loans, car payments) DIVIDED by your gross MONTHLY (annual/12).

3) I am very suspicious of the 4.5% rate since in this current market, that rate would only be available if you paid one or more points. OFTEN less than totally honest mortgage lenders quote "zero" points while still charging you an "Origination Fee" of one point which is still... one point! This enables them to quote artificially (IMHO) lower rate. When looking at a refi, one needs to not only look at the reduction in rate, one needs to look at HOW LONG it will take to recoup the expenses involved in getting that new loan based on the actual reduction in monthly mortgage payments.

If you were a relative of mine (in good standing)... I'd tell you to concentrate on paying all your debts on time and getting a new job... then consider if a refi will make sense (including the cost of getting the refi)