If you still have a few years left on your mortgage, refinancing can save you a lot of money. But you can also refinance if you just want to use the equity in your home or lower your monthly payments.
People who are thinking about refinancing their mortgage often ask, "How much will it cost?" Costs vary by lender and loan amount, but here are some guidelines that will help you compare financing companies and what they have to offer.
New Home Loan Fees
When you refinance, you get a new loan and have to pay all those fees all over again. Fees like the application fee, appraisal fee, survey costs, attorney review fee, title search, and home inspection will usually add up to between $1000 and $2000. This is on top of the loan origination fee, which is usually 1%, and any other points.
Some lenders offer loans with no fees and no points, but the interest rates are higher. These kinds of financing plans make sense if you are worried about the initial costs and are willing to pay more over the life of your loan.
Loan Points
Each point is equal to 1% of the loan, which is due when you sign the loan. So, on a loan of $100,000, one point would cost $1,000. In addition to the origination fee of 1% or more, you can also use points to buy lower interest rates. If you plan to live in your home for more than seven years, lower interest payments could help you save money.
Find cheaper prices
Comparing companies can also help you find a better deal on your mortgage. The easiest way to do this is to compare interest rates and fees by getting quotes online.
You can also try to get your first mortgage company to lower your interest rate or closing costs. It helps if you can tell them that another lender has a better deal for you. But sometimes a better deal is available from another lender.
Different Loan Terms
Long-term interest costs can also be cut with a shorter loan term or a fixed-rate mortgage. If you choose a 15-year loan, you can cut your interest costs by almost half. If you have an adjustable rate mortgage, you can protect yourself from rising interest rates by switching to a fixed rate mortgage.
