What Are The Costs of Refinancing?

Estimated Closing Costs

The following fees are described below to help you understand what charges you are most likely to encounter in a Refinancing:

• Application Fee. The Lender charges this fee to you to cover the initial costs of Processing your loan request and checking your Credit report.

• Appraisal Fee. This fee pays for an Appraisal">appraisal which is a supportable and defensible estimate or opinion of the value of the property.

• Lender's Attorney's Review Fees. The lawyer or company that performs the Closing for the lender will usually be charged in fees paid by the lender itself. Settlements are conducted by lending institutions, Title insurance companies, Escrow companies, real estate brokers, and attorneys for the buyer and seller. In most situations, the person performing the Settlement is providing a service to the lender. There will most likely be other legal services relating to your loan included in these fees, which are provided to the lender. Having an attorney to represent you at all stages of the transaction including settlement may be a great idea in case you are unsure of the terminology used in the documents. You may also want to retain an attorney to get advice on what you should or should not do.

• Title Search and Title Insurance. This charge will cover the cost of examining the public record to confirm ownership of the real estate. It will also cover the cost of a policy, usually issued by a title insurance company, which insures the policy holder in a specific amount for any loss caused by discrepancies in the title to the property. *You could possibly save up to 70 percent of what it would cost you for a new policy. Make sure to ask the company carrying the present policy if it can reissue your policy at a reissue Rate.

• Loan Origination Fees and Points. The Origination Fee is charged for the lenders work in evaluating and preparing your Mortgage loan. Points are prepaid finance charges imposed by the lender at closing to increase the lender's yield beyond the stated Interest rate on the Mortgage Note. One point equals one percent of the Loan Amount. For example, one point on a $75,000 loan would be $750. In some cases, the points you pay can be financed by adding them to the loan amount. The total number of points a lender charges will depend on market conditions and the Interest Rate to be charged.

• Prepayment Penalty. A prepayment penalty on your present mortgage could be the greatest deterrent to refinancing. The practice of charging money for an early pay off of the existing mortgage loan varies by state, type of lender, and type of loan. Prepayment penalties are forbidden on various loans including loans from federally chartered credit unions, FHA and VA loans, and some other home purchase loans. The mortgage documents for your existing loan will state if there is a penalty for prepayment. In some loans, you may be charged interest for the full month in which you prepay your loan.

• Miscellaneous. Depending on the type of loan you have and other factors, another major expense you might face is the fee for a VA Loan Guarantee, FHA Mortgage Insurance, or private Mortgage Insurance. There are a few other Closing Costs in addition to these.

Costs may vary substantially from area to area and from lender to lender. The following are estimates of what a refinancing may cost you. Remember that they are only estimates. Your actual closing costs may be higher or lower than the ranges indicated below.

• Application Fee $75 to $300

• Appraisal Fee $150 to $400

• Survey Costs $125 to $300

• Home Owners Insurance $300 to $600

• Lender's Attorney's Review Fees $75 to $200

• Title Search and Title Insurance $450 to $600

• Home Inspection Fees $175 to $350

• Loan Origination Fees 1% of loan

• Points 1% to 3%

• Mortgage Insurance 0.5% to 1.0%

In conclusion, a home owner should plan on paying an average of 3 to 6 percent of the outstanding Principal in refinancing costs, plus any prepayment penalties and the costs of paying off any second mortgages that may exist. Check first with the lender who holds your current mortgage to see if you can save on some of these costs. The lender may be willing to waive some of them, especially if the work relating to the mortgage closing is still current. This could include the fees for the title search, surveys, inspections, and so on.

See How Much You Will Save When You Refinance!

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