Mortgage refinance involves giving up your current mortgage for a new loan with different terms. This offers several benefits. It can help you save money if you qualify for a lower interest rate. Or it could lower your monthly payments and make them more affordable. It also allows you to free up cash by tapping into your home equity.
The biggest downside of refinancing a mortgage is the high closing costs. These high fees are what deter many homeowners from refinancing their home loan. Before signing any agreement, it helps to explore ways to avoid or lower some of these costs. Below are some tips for lowering your mortgage refinance costs and things you will want to look for.
Closing costs are the fees the lender charges you to refinance your mortgage. You’ll pay these costs when you sign the refinancing papers. The total amount you pay will depend on a number of factors. Generally, closing costs come to about 3% to 6% of the total amount you’re refinancing. If you’re refinancing a mortgage of $150,000 you can expect to pay about $4,500 to $9,000.
Some of these closing costs are charged by the lender. Other fees are charged by third-parties who facilitate the process. Some of these fees are negotiable but others aren’t.
Negotiable costs include:
Non-negotiable costs include:
Besides closing costs, these are some things you can do to lower your total mortgage refinance costs.
1. Compare lenders – Lenders vary in the interest rate they offer as well as the mortgage terms. You can save a lot by choosing a lender offering you the lowest interest rate.
2. Start with your original lender – While it’s good to check the competition, don’t forget about your own lender. Lenders prefer to keep their existing clients instead of looking for new clients. Your lender may give you the best deal so they don’t lose you as a client. You’ll get the best deal possible if you have a history of making on-time payments.
3. Negotiate fees – Always negotiate the fees. This is whether you refinance with your same lender or a new one. Lenders often raise their rates to leave room for negotiation. Open up negotiations with your lender and see where it goes.
4. Request to waive appraisal services – This may be possible if you had your property appraised recently and real estate prices have not changed a lot. This one step can save you hundreds of dollars.
5. Don’t buy discount points – Discount points are optional. It does help you save money in the long run but it can add a lot to the closing costs. If you don’t have that money on you, you don’t have to buy discount points.
6. Comparison shop third-party services – When paying for third-party services, compare different service providers. Ask about their fees and what they offer for that fee. Find out what’s included in the fees. Finally, hire a company or individual offering the best deal.
Don’t let the high closing costs keep you from enjoying the benefits of refinancing your mortgage. The tips above can help to lower your mortgage refinance costs.
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