Homeowners who refinance to lower their mortgage payments typically know about the additional costs involved with the refinancing. Some of these expenses are not listed with the standard mortgage details. Other factors help to determine your refinance closing costs as well such as the current area you reside in or the bank you choose to work with. To accurately calculate the final refinance closing costs, you should obtain a complete list of all refinance closing costs. Some common costs include title fees, insurance, processing and appraisal, and property inspection.
One item that is often overlooked when calculating refinance closing costs is the origination fee. The origination fee is charged by the company that guarantees or co-signs the loan. If the borrower has a co-signer, the mortgage lender will add the fee onto the final loan amount. This fee is in addition to the title or closing fee that is already charged.
Mortgage lenders typically offer their preferred refinance lenders for a fixed, initial rate that is higher than what they currently offer. This is because these refinance closing costs are calculated on the assumption that interest rates at the time of the refinance will be lower than they are today. If interest rates should increase, the lender loses the origination fee.
Knowing how much are refinance closing costs can help you decide if you are financially prepared for the new mortgage payment. If you know the costs ahead of time, you can budget and plan ahead. You will have a better idea of how much you can afford to pay each month and when you will be able to do it. You may also be able to negotiate a better interest rate since your future quotes are based on what you currently pay today.
The length of the loan term is an important factor when you are determining the total cost. Lender fees will always be included in the loan term no matter how long it is. The shorter the loan term, the more origination fees will be added. A longer term allows you to pay fewer origination fees, but the longer the loan term, the higher your monthly payments will be.
You will also need to decide if you want a new fixed rate or a variable rate mortgage refinance. Fixed rates remain the same for the life of the loan and are not affected by changing market conditions. Variable rates change frequently and your payment amount can vary from one month to the next. It can save money if you refinance with a fixed rate. The closing cost of the mortgage refinance will be higher, but it can save money if you are planning to stay in your home for several years.
If you have poor credit, you may be able to qualify for a no-cost refinance. It is possible for you to refinance even if you have filed bankruptcy in the past. If you have good credit, you can still qualify for a refinancing with reasonable interest rates and minimal fees. If you have poor credit, you may not qualify. You must take special measures to improve your credit score before you refinance.
The closing cost depends on the type of refinance process you choose and the property taxes you pay. Some costs vary based on whether you pay a fixed fee or include closing costs in the mortgage. You will also see miscellaneous expenses such as appraisal fees, application fees, title and insurance costs, and other miscellaneous fees and charges. These fees can increase the cost of the refinance process, so it is essential that you carefully review the fees before signing on the dotted line. To learn more about the costs that you will pay during the refinance process, contact a local mortgage broker.