Refinance FeesMany homeowners are eager to take out refinance loans to save money. They envision lower interest rates and lower monthly mortgage payments. This is not inaccurate. Most refinance loans end up saving their holders a lot of money. But there are multiple costs associated with every mortgage refinance, and borrowers should be aware of these costs Origination FeesSome of the fees you’ll encounter will be origination fees, including document preparation, administration, processing and closing costs. Many of these fees will be similar to the ones you paid when obtaining the mortgage in the first place. There may also be third party fees for appraisals, title searches, and home inspections. You may even have to pay government fees, such as the cost for recording the deed. Many homeowners forget about these fees and end up rolling these costs into the principal of the refinance loan. This is not a bad idea, but if you take this approach, you’ll end up taking on a more expensive loan than you originally planned for. Make sure you get a good faith estimate from the lender beforehand so you know what fees to expect. Do your homework to find a reputable lender who will disclose all fees up front. Hidden CostsThe hidden cost of refinancing is that many people who refinance multiple times never get close to paying off the principle of their loans. They continue to refinance for a lower rate but don’t keep the loan long enough to benefit. The closing costs of each new loan stack up and never get paid down. This is the hidden cost of multiple refinances. Once you refinance, it’s a good idea to stick with the new loan for a while in order to reap the benefits of the lower interest rate and lower monthly payments. It’s much better to work on paying down one lower refinanced loan than to perpetually remain in debt, paying only on the interest of the newest loan. Another hidden expense you may encounter is the cost of getting an ARM refinance when mortgage rates are low. If you’re in an adjustable rate mortgage and current market rates have decreased lower than when you took out the loan, you may be getting a lower rate on your current loan than would be available with a fixed rate mortgage refinance. Research LendersThe closing costs you pay to refinance your loan will differ from lender to lender. Some lenders may even allow you to avoid all closing fees through a no cost refi. Make sure you evaluate all options available to you before deciding which lender to work with. |
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