Over the past two weeks we’ve spent a lot of time taking an in-depth look at closing costs, in our first ever mini-series. We’ve looked at everything from what they are, to how much they can actually cost, and even how you can get other people to pay them for you. But, we’ve been focusing mainly on first mortgages. What closing costs are you facing when you refinance your home? That’s just what we’ll look at in this last part of our mini-series.
Home refinancing is becoming more and more popular as the interest rate goes down. It makes sense. You’re paying a higher rate than what’s available now, so you go see your lender or mortgage broker to refinance and start paying less (maybe even get a little money in your pocket at the same time.) But, people are no longer playing by traditional rules. It used to be that it made sense for homeowners to refinance if they could lower their interest rate by 2% or more. But, with rates so attractive and homeowners hearing “refinance, refinance, refinance!” everywhere they go, they’re beginning to refinance to save less than 2%, and sometimes even less than 1%. What’s the problem? You’re still saving money, right? Well, maybe not.
The problem comes in when it’s time to pay the closing costs on that home refinancing; and yes, they’ll be there. And yes, because you’re refinancing and are therefore already the owner of the home, you won’t be able to ask the seller to pay them either. So what closing costs can you expect to face when refinancing your home? It will depend whether or not you’re using the same lender to refinance the loan, but here are a few that you might face:
- Interest
- Reconveyance fee
- Demand fee
- Sub-escrow fee
- Loan tie-in fee
- Homeowners’ Association transfer fee (if refinancing a condo)
- Application fee
- Loan origination fee
- Appraisal fee
- Credit report fee
- Recording fees and taxes
- Title search/title insurance
- Attorney fees
To know whether or not home refinancing is going to really save you the money you think it will, the only thing to do is to determine how much you will be lowering your interest, and determine how much you will have to pay in closing costs for your refinanced loan. If there’s a substantial difference between the two, it might be worth it to refinance. If not, you might want to wait until refinancing makes more sense for you. Of course, your lender or your mortgage broker can always help you determine if refinancing is right for you.
