The cost to refinance your mortgage can vary due to many factors, such as the lender, loan amount, credit score and interest rate. Homeowners who shop around and try different lenders may be able to lower their mortgage refinance closing costs and fees.
The closing costs of your refinance will usually include appraisal fees, credit fees, points, insurance and taxes, lender fees and escrow and title fees. If you have enough equity in the property when you close, you may want to finance the closing costs and add them to the current balance. You might also cash out some of your equity. If you want to lower the balance of the loan, you may also use cash to cover your expenses at closing.
Homeowners who opt for a no closing cost mortgage can avoid many of these fees and having them added to the loan balance or paying them out of pocket by having a higher interest rate.
Below is more information about mortgage refinance closing costs and lending fees.
Escrow and Title Fees
Escrow and title fees include the lender and owner policy for title insurance, as well as the escrow fee. Title insurance protects the owner and also the lender by insuring there is a clear title on the property.
Also, it proves that people who have the legal right to give title for the property are the ones who are actually doing so. In some situations, the title policy will protect the buyer against fraud or forgery.
Most homeowners doing a refinance already paid for title insurance when they bought the home and are not interested in paying for it again.
Also remember that lenders and owners are insured. The new loan that is created during the refinance will require a new title policy. Some title companies will give you a reduction in escrow fees and title policies if you need to refinance.
Escrow fees are the service fees that the title company charges for being an independent third party to the transaction. It ensures that both sides of the transaction do as they agreed to.
Other title fees can include courier fees, express mail fees and the recording fee. Mortgage document notarization fees and the notary’s fee are also commonly charged.
Lending Fees for Home Refinancing
Flat fees that are charged by the lender to process and fund a mortgage are known as lending fees. Some of these fees are processing, underwriting, document preparation and administrative and funding fees. Additional lending fees include tax service fees, wire and flood certifications. Most lenders charge these fees and you can expect to pay $650 to $850 to pay for all of them.
Points or Origination Fees on a Refinance
Points usually consist of discount fees and origination fees. Discount fees are prepaid interest that you can pay up front that you can use to buy down the interest rate. Origination fees also are used to pay down the interest rate but are usually used to pay the mortgage originator during a financial transaction. This avoid them having to take a higher rate where the lending company funding the mortgage pays the mortgage originator. One point is 1% of the whole mortgage amount.
Fees that the home appraiser charges to inspect the home depends upon whether it is an investment property, what kind of home it is, and if the owner will live in it. Usually an appraisal for a condo or town-home is $300 or $400. The appraisal fee for a single-family home is usually $500 to $700.
This is the fee to review your credit report during the underwriting process. It can cost from $25 to $65 per couple or person. If there are inaccuracies on the report, there will be higher fees from the credit bureaus.
Your homeowner’s insurance policy should be current when you close the mortgage refinance. The usual coverage required by the mortgage lender is the cost to replace the home. Many mortgage lenders require this policy to be effective for no less than four months after you make the first mortgage payment.
Most counties in the US require the payment of property taxes on an annual or semiannual basis. The lender will require that all outstanding property taxes be paid when the mortgage closes. Borrowers who are doing a refinance when property taxes are due may need to pay the tax payment to the escrow company.
While there are a lot of fees involved in the mortgage refinance process, you can save money by checking with several lenders. You may be able to save on some of these fees.