Costs Associated with a Refinance Mortgage
A Home Buying Article Contributed by Elizabeth Fox-Wise
Although Most People Refinance Their Mortgage to Save Money, First They Must Spend It
Whether you are considering a mortgage refinance for a lower interest rate, a different type of mortgage, or new mortgage terms; odds are good that you are hoping to save money on your mortgage through your refinance.
If your monthly savings are high enough, and you intend to own your home long enough, a mortgage refinance could save quite a bit of the term of the mortgage. However, with a mortgage refinance you will have to first spend money before you can save money.
Some Charges You Will Often Encounter with a Refinance Mortgage
The costs associated with a mortgage refinance will vary based on your circumstances, but basically you can expect to pay everything that you paid the first time you mortgaged the home.
You will have to pay a refinance mortgage application fee when you file the loan application. This is a fee charged of the mortgage application by the lending agency. This covers their costs associated with processing your mortgage refinance application and getting a credit report on the applicant. The amount of this fee will vary and is determined by the lender.
You will also have to pay for a title search on the home. Even though you already own the home, a title search will still need to be conducted. This charge will cover the cost for examining public records to confirm ownership of the home.
Most likely the mortgage applicant will be responsible for paying the lending agency's attorneys fees. The lender will secure an attorney to handle the closing on the home.
Another mortgage refinance cost is Loan Originating fees and points charged by the lender. The origination fee is charged by the lender to cover the work involved with evaluating your mortgage application. Points are almost always charged by the Lender. Typically one point equals one percent of the mortgage amount and you may have to pay as much as three or four points.
You will also have to pay an appraisal fee to get your home appraised.
Other Assorted Expenses Associated with a Refinance Mortgage
Depending on the type of refinance mortgage that you are pursuing, there may also be other fees associated with the mortgage refinance. If you are pursuing a VA or FHA mortgage loan, they have fees that they will charge as well. Depending on the nature of of the refinance mortgage and how large it is in proportion to the value of the property, there may also be the expense of mortgage insurance.
There also might be penalties associated with pre-paying your original mortgage before its term is up. Be sure to check with your first lender to see if there is any way to avoid penalty fees.
In general, you should expect for it to cost you approximately three - six percent of the principal loan amount in mortgage refinancing costs. This is before factoring in an pre-payment penalties that your might incur from your first mortgage lender.
