When you
refinance, you pay off an existing mortgage obligation in order to create new
one, but under different and under preferable terms. Why consider it in
the first place? Aside from lowering your payment, you also have the option of
increasing or decreasing your payment terms. This allows you to pay off their
debts sooner, build equities, and put more money on their savings.
Before
setting your decision in stone, you need to carefully evaluate your options in
order to choose the loan structure that would best work with your plans. You
must know your financial goals, and think of how exactly you will pay the loan.
Before you could fully reap the benefits of refinancing, it is important to
understand the costs that come with it. It may feel like reliving your original
encounter with the same procedures and possibly the same amount of spending.
While there
is such an offer as no-cost refinancing in which the lender shoulders all
possible expenditures in closing costs, you need to take this on with caution.
This can result into two things. They can charge you with a higher interest
rate or they can add the total expenses to the amount you’ve borrowed. You will
be repaying these fees for the entirety of your loan.
Generally,
the following are list of fees that you are most likely to pay when
refinancing:
- Application Fee - This includes the costs in checking your credit report and initial processing of request. In most cases, this is not refundable regardless if your proposal has been approved or rejected. This could range from $75 to $500.
- Origination Fee - It is a percentage of the total loan, used in processing (preparation and evaluation) your mortgage loan.
- Title examination and Title Insurance - This fee is for the verification of the ownership of the property, whether the broker or lender wishes to access public records. They can also look into the insurance and policy availed in order to relieve the lender of any discrepancies.
- Appraisal Fee - It is an assurance fee that the property they have acquired is worth the loan that has been granted to you.
- Inspection Fee - This covers inspection of the condition of the properties, which may include termite inspection, structural foundation or a water test.
- Legal Fee – The payment for any legal services that a lender has sought.
- Points – These are negotiated fees at closing. A point is equal to 1% of the total loan. There are two-types: Loan-discount points which can reduce the interest of your loan, and points that brokers may charge in order to yield more revenue.
Keep in mind
that buying a home is one of the most crucial financial decisions of your life.
Refinancing can be long and tedious. It is important that you get all the facts
and figures straight to determine the best plan for you!
