Refinancing can be a great move for many homeowners. It can pay off existing mortgages, some closing costs, and can even return equity to you. However, you probably know that there are costs to refinancing that can make you wonder if it’s really worth it in the long run.
If you’ve been informed that the cost of refinancing a mortgage probably isn’t worth it unless you can lower your interest rate by at least 1%, you should know that that this isn’t always the rule. There are other factors to consider when deciding whether or not refinancing is worth it for you. You should remember that the savings you get from mortgage refinancing should be greater than the costs. This should be your main objective.
You should know what refinancing rates are available. You can find out your interest rate by talking with a mortgage loan office. They can base your potential rate based on your credit score. Then you’ll be able to calculate your monthly savings and determine whether the cost of mortgage refinancing is worth it.
Refinancing a mortgage loan can be a long and expensive process. Make sure you have accurate figures when calculating your costs and savings, and use a refinance calculator from to help determine whether refinancing is right for you.
Here are some of fees associate with refinancing a mortgage:
Application fee: You must pay a mortgage application fee to cover the cost of an appraisal, credit report, and other administrative costs.
Origination fee: Also called a loan processing fee, the origination fee is usually a percentage of your total loan. Generally, the fee is around one percentage point of your refinanced mortgage loan total.
Appraisal fee: You need to find out the value of your home because it plays a huge part in the determination of your mortgage rate. It also determines whether or not you can receive cash out after refinancing.
Document preparation fee: This is a fee that many lenders charge in order to review the refinancing documents before the loan is closed.
Title examination fee: The lender may want to examine public records to make sure that you are the owner of your home.
Additional miscellaneous costs: Expect to pay various other costs including pest inspections, recording fees, taxes, and courier service fees, among others.
The cost of refinancing your mortgage depends on several factors. First, it depends on the lender and loan that you choose. Second, the cost of settlement services in your area is a deciding factor. Lastly, refinancing costs can depend on the recording fees that are charged by your local government.
Only you can decide if refinancing is a good option for your budget. The cost of refinancing is an investment because you want to save money in the long run.
The Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm. We can also match you with potential lenders who have products that may help you and provide you with a sense of stability. As an added feature of the Home Loan Advisor service, we provide you with a free home value report generated from Neighborhood IQ.
