A home appraisal is a key ingredient for processing a home equity loan or a second mortgage. The valuation of a home can determine the maximum loan amount, and influence the home equity rate.

To speed up the process and reduce costs, most lenders now use an AVM home appraisal, which stands for Automated Valuation Model. An AVM is a computer generated appraisal that calculates a home value based on comparable sales, title records, and other market factors within a zip code.

There is usually no appraisal fee to a home equity loan borrower, because there is no need for an appraiser to inspect the home, which also cuts the appraisal time to only one or two days. 

Automated home appraisals are typically used for home equity loans and second mortgages up to $100,000. Loans over $100,000 may require a full home appraisal with an onsite inspection, which can cost the borrower $300 to $350. For a home owned less than 6 months, the lender may use the purchase price instead of a new appraisal.

Homes located in urban areas have better success with automated appraisals, because more property information is available. Rural properties and areas with little sales activity may not have sufficient data, which means a standard home appraisal would be needed.