Refinance Fees

Many people are eager to take out a refinance loan to save money. They envision the lower interest rates and lower monthly mortgage payments. However, there are several costs associated with mortgage refinance loans that the borrower should be aware of.

Some of the fees the borrower will encounter will be broker fees-including document preparation, administration, processing and closing cost fees. Many of these fees will be similar to the ones the borrower paid when they obtained their first mortgage. There may also be third party fees for appraisals, title searches or home inspections. Finally, there may also be government fees such as the cost for recording the deed.

Many homeowners forget about these fees and end up adding a large chunk to their refinance loan, only to find themselves taking on a more expensive loan then they had originally planned for. The borrower should get a good faith estimate from the lender beforehand, so they can know what to expect fee wise. Borrowers should do their homework to find a reputable lender who will disclose their fees up front.

The other hidden cost of refinancing is that many people who refinance multiple times never get close to paying a large portion of the principle of their loan-they continue to refinance for a lower rate, but end up only having that refinance loan long enough to pay on some of the interest. Once a borrower has refinanced, it is good for them to stick with those loan terms for a while in order to see the result of the lower interest rate and lower monthly payments. It is much better for a borrower to work on paying down one lower refinanced loan than to perpetually keep them in debt paying only on the interest of their newest loan.

Knowing about the true costs of refinancing can help a borrower make a wise decision when they are ready to refinance their home for a lower interest rate and lower monthly mortgage payments. Going into a refinance with their eyes open to the true costs of refinancing will help the borrower save a lot of money and heartache in the long run.