If you want to refinance your home mortgage, costs and expenses may be an important consideration. Refinancing does involve various fees and expenses, and this is true whether you pay these charges up front or they are rolled into the loan so there is no up front costs involved.
Each lender is different concerning the actual fees and charges that you will be responsible for, so make sure that any lender you choose is honest about the true cost to refinance your mortgage. Understand what you will be expected to pay for before you make a final decision about mortgage refinancing.
Most experts advise that it usually costs between three and six percent of the principal still owed for refinancing, and this amount does not include any prepayment penalty that is in your original mortgage contract.
Prepayment Penalties When You Refinance Your Home Mortgage
Many mortgage contracts include a prepayment penalty, which can vary in size from one mortgage to the next. This penalty will usually range from one or two months to six months or more of mortgage payments, and some penalties are very steep. It is a good idea to check your current mortgage and determine if there is a penalty for refinancing your mortgage, and if there is how much this will cost.
Application And Loan Origination Fees With Mortgage Refinancing
When you refinance the mortgage on your home, you are usually expected to pay many of the same fees as a first mortgage. This includes an application fee, which is intended to cover the costs incurred for processing your loan application and credit rating. This fee can range from less than one hundred dollars all the way up to three hundred dollars or more, and even if you are denied the mortgage you may still have to pay this cost.
The loan origination fee is another possible cost with mortgage refinancing. This expense is used to cover the evaluation and preparation costs for your mortgage loan. This expense usually runs from no money at all to a specific percentage of the loan principal, such as one or one and a half percent.
Appraisal, Inspection, And Closing Costs When You Refinance Your Home Mortgage
Appraisal and inspection fees are common with a mortgage refinance loan, and the combined cost for these two fees can be from three or four hundred dollars to over one thousand dollars. An appraisal may be needed by the lender to ensure the current value of your home, and an inspection will verify the condition and structural soundness.
Closing costs are another consideration, and if an attorney reviews the documents before the closing these fees can be added in as well. Closing costs may run from zero to more than one thousand dollars, depending on the specific circumstances and factors.
Points And Various Other Costs With Refinancing Your Mortgage
Points are another form of fee, and each point is the same as one percent of the principal amount that you are refinancing. Some lenders may not charge any points at all, while others may charge between one and three points.
A survey fee may be required if the lender insists on a current survey of your home, and this expense can run into the hundreds of dollars. You may also need a title search and title insurance, along with the required payment for these services, just like you did with the original mortgage.
A new homeowners insurance policy may also be needed, and in some cases this may require a fee paid in advance before your coverage starts. Each lender is different, and may charge all, some, or few of these fees when you refinance your home mortgage. Make sure you understand what fees you must pay before you agree to any mortgage refinancing offer.