You’ve done your research on the best time to refinance your mortgage,and you are ready to start the process before the Federal Reserve decides to start raising interest rates again. It seems like everything else is in place: you plan on staying in your home for a long time, lending conditions have eased, and current mortgage rates are extremely low. Refinancing or “resetting” a mortgage is a great option for homebuyers that want to take advantage of market conditions like lower interest rates over time, take the opportunity to reduce the term of their original mortgage, or acquire cash from the home’s equity value to use on other purchases through cash-out refinance transactions. Homeowners can also benefit from refinancing by reaping the rewards of an improved credit standing in most situations.
But how much does refinancing your mortgage actually cost? One thing that most homeowners forget to consider when considering a refinance is that there are fees associated with the process. These fees vary based on location and company, which is why it is essential to shop around before you refinance your mortgage. Below are some fees to keep in mind and to discuss with your lender before making a refinance decision:
- Administrative Fees: Just like when applying for your original mortgage, there are administrative fees that cover generating the information and data necessary to obtain refinancing contracts. Administrative fees to expect include paperwork fees, appraisal fees, application fees, loan origination fees, points fee, inspection fee, survey fee, title search/insurance fee, and others similar.
- Closing Fees: Once you have been approved for your refinance, closing fees come into effect under names like paperwork fees, attorney review/closing fees, or closing costs. These can get pricey, so it is important to take them into consideration before applying.
- Other Fees: It is crucial to understand the terms and conditions of your refinance like the back of your hand. Discuss with your loan officer things like prepayment penalties (fees that can cost anywhere from 1-6 month’s interest payments) that charge you for paying off your existing mortgage early, and other penalty fees that could impact you financially.
Most mortgage-related fees are paid upfront at closing, however some lenders offer “no-cost” refinancing, which includes these fees in your loan balance or interest price during the term of your refinance. Once you take into consideration all of the fees that will be associated with your refinance, calculate the break-even point of your new mortgage through online resources. If the refinance still makes sense financially, sign the papers! If you’re feeling overwhelmed, don’t fret. The Home Ownership and Equity Protection Act (HOEPA) protects those who refinance from high fees and interest rates.
Alpha Mortgage is proud to serve North and South Carolina with the best mortgage rates and informed loan officers. Need more information about refinancing your mortgage? Contact us today.