Will I have to pay
upfront to Refinance?
Will I have to pay up front to refinance? - Usually, the fees associated with refinancing your mortgage are rolled into the final loan amount. Its not that you
don't have to pay the fees, its just that they are taken out of the equity in your home. You also have the option to use a 0 fee loan, but your interest rate will be increased to recapture the costs in the form of interest payments from you over the life of the loan.
Check with your Mortgage Broker to determine which method, rolling your fees into the loan or paying for them yourself, will work best for your financial situation.
Every broker has different requirements as far as what is required to be paid, and when. For example, some will require that you pay for the appraisal at the time it is completed while others will allow you to pay it out of the final closing proceeds.
If there is not enough equity in your home to cover all of the fees, you can still reap the benefits of refinancing, but you will be bringing money to the closing.
Financing fees and/or closing costs into your loan is usually the better decision that to pull money out of your pocket to pay for the closing costs. Paying the closing costs and closing fees out of your pocket will provide you with a tiny bit more equity in your home as opposed to rolling the fees back into your mortgage. However, that equity or money available through the equity of your home will never be as easily accessible for emergencies or other items that may come up in your life. A good mortgage professional will be able to help you decide what should be best for your situation.
Mortgage Refinance Costs - When you refinance your mortgage, you usually pay off your original mortgage and sign a new loan. With a new loan, you again pay most of the same costs you paid to get your original mortgage. These can include settlement costs, discount points, and other fees. You also may be charged a penalty for paying off your original loan early, although some states prohibit this. The total expense for refinancing a mortgage depends on the interest rate, number of points, and other costs required to obtain a loan.
This will all depend on what state you are in, but closing cost fees will usually be different for every lender some incur other fees that the other wouldn't. It is best to discuss these with your loan officer.
All costs associated with your refinance will be reflected on your good faith estimate (GFE). The GFE will itemize each of the costs associated with the loan, and can be subject to change if the terms of the loan change. When comparing loan programs and interest rates between companies, always be sure to get a copy of the GFE. This way you will be able to see the overall costs of the refinance between the companies.
Your mortgage professional should consider the new costs involved in your refinance to determine if refinancing is in your best interest. The refinance should make obvious sense. If you are only going to save a small amount of money each month, you will probably be spending a lot more money on the new loan than you will be saving.
The type of loan program you choose and the lender you go with can affect your refinance closing costs. You may choose a zero closing cost loan or choose to roll your closing costs into the loan amount. Ultimately, one should decide if the payment and the loan program works for them. In most cases, closing costs can be written off on your current year tax returns (consult your local CPA or tax preparer for more details).
When you refinance your home loan their will generally be title charges associated with your refinance. These charges will be associated with the title company handling your mortgage transaction. Some of the title fees may or can be: settlement fee, title insurance, title binder, closing fee, overnight delivery fee, wire fee, notary fee, and a package handling fee. There are other title fees that can be associated with your refinance also and these fees can be charged by different title companies in different variations. One title company may charge a closing and settlement fee and another may only charge a closing fee. This is why it is a good reason to look over your good faith estimate to make sure the title charges seem reasonable. Question anything you are unsure of and what it is for.
Refinancing can sometimes be accomplished without closing costs. The interest rate will be higher but, depending upon how long you plan to keep the loan, it may work out to your advantage. Ask your mortgage professional to discuss both alternatives with you and lay out the advantages and disadvantages of each approach for your specific situation.
Did you forget to pay your property taxes? If no, most title insurers will require it be paid current as a condition of obtaining title insurance. This may mean less cash out or more cash required at closing. If your taxes were paid recently be sure to keep a copy of the receipt as the update may not yet be apparent to the title company.
Be sure that you compare the final closing fees with your original GFE. If the closing costs vary by a wide margin you have three days to cancel the transaction.
How to avoid costly refinance mistakes - So why do you want to refinance your mortgage? Are you trying to save money with a lower monthly payment? Are you trying to lower your interest rate? Do you want to refinance with a cash-out equity loan?
If you’re simply trying to find a lower interest rate, make sure you examine the related fees and closing costs. If you can save enough money to cover these costs, refinancing may be right for you. At First Security Financial Services, Inc. we will provide you with a Good Faith Estimate so you can analyze these costs.
It will be important to understand if your current mortgage carries a "prepayment penalty" fee. If the payoff comes with this fee associated your estimated costs, fees and or cash out will be dramatically affected by this additional cost.
At First Security Financial Services, Inc. we will do a complete financial analysis to see if combining some of your credit debt to your refinance will be cost effective. We will compare interest rates on your current debt as well as monthly cash flow advantages.
If you are quoted a loan with settlement charges that you feel to be extremely high, make sure you contact another mortgage professional to get another quote to compare the first one to. Too many people do not shop around enough or even at all to make sure they are getting a fair deal. When comparing the quotes make sure you look over the entire quote as a whole and not just at the settlement charges. Compare the rates, compare the closing costs, compare the loan programs that they have worked up for you, etc... Company A may have higher settlement charges but a rate that is better by a full percent and Company B's closing costs may be a little lower but his rate is higher and on a worse loan program than Company A. If the quotes are close it is usually best to go with the company that you feel most comfortable with and that you feel is the most upfront.
When comparing loans between several companies, be sure that you are being quoted on the same loan program. Different mortgage loans can have different closing costs associated with them. Also, ask each company for a copy of the Truth-In-Lending (TIL). The TIL will break down the total cost to close your loan, reflected as the APR. The TIL will also show if there are any prepayment penalties with the new loan.
If you have any questions regarding our products, you can contact us by calling or e-mailing us and we'll get back to you as soon as possible. Thanks!
Information listed above is to be used for educational purposes only and is not guaranteed