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Refinance
The Cost Of Refinancing A Mortgage
Refinancing
your existing mortgage can be a great way to save
money and pay off you home sooner. During a low interest
rate market, refinancing can make a lot of sense.
However, don't go rushing into a refinancing deal
until you understand the costs involved.
Essentially, there are two main types of refinancing
programs: Rate and term refinancing and cash-out refinancing.
A rate and term refinance involves adjusting the interest
rate, the loan term or both, without any new money
being taken out. This is the most popular type of
mortgage
refinancing plan, as it usually results in lower
monthly mortgage payments. A cash-out
refinance is when a homeowner refinances for more
than what they owe on the home and gets to spend the
difference. Both of these types of refinancing plans
will require certain fees and closing costs. There
is another type of refinancing loan that requires
no upfront costs at all - the no-cost refinance –
but for the purposes of this article, we'll talk about
the costs that are usually associated with regular
refinancing. Keep in mind, these are estimates only
and your actual costs will vary depending on your
area.
Most Common Costs Associated With Refinancing (will
vary between lenders, brokers, and banks)
Application Fee ($75-$400)- covers initial costs of
processing your loan request and running your credit
report
- Title Search and Insurance ($450-$1K+) - covers
cost of examining the public records as well as
the cost of a title insurance policy
- Appraisal Fee ($250-$450)
- Survey Costs ($125-$300)
- Lender's Attorney's Fees ($150-$500)
- Home Inspection Fees ($175-$350)
- Mortgage Insurance (0.5% to 1.0%)
- Points (.125% to 3+%)
- Miscellaneous - Keep in mind you could be charged
additional fees not listed above depending on what
type of loan you are refinancing. FHA mortgage insurance
or PMI are a few examples.
To summarize, homeowners should anticipate spending
2-6 percent of the outstanding principal in refinancing
costs. If you have any prepayment penalties, those
will also have to be factored in as well as the cost
of paying off any second mortgages you may have. Always
check with the lender who holds your current mortgage
if you are unsure about anything.
The information in this article is designed to help
you make an informed decision when it comes to refinancing,
but it does not replace the value of professional
advice. Always check with a trusted mortgage professional
or attorney before making any final decisions.
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