Refinancing your home can save you thousands of dollars per year! When you extrapolate that savings over the lifetime of your loan, it’s no secret why refinancing seems like an attractive option for millions of homeowners.
However, it’s important to note refinancing your mortgage comes with fees. Before you decide if refinancing is right for you, be sure to do all the math on the various fees associated with refinancing
What exactly are the mortgage refinance fees? Mortgage refinance fees cover a wide range of expenses associated with refinancing your loan. Some of the most common fees are:
What documents do you need to complete the refinance process? Find out here!
Refinancing your mortgage has a tremendous amount of benefits.
There are an endless number of reasons why someone may consider refinancing, but these reasons certainly make the top of any list.
Understandably, the fee list outlined above may seem intimidating, but there are ways to lower your refinance fees.
The best way to lower your refinancing fees is to shop around for the most competitive rate possible. The borrower has the right and freedom to secure financing from a lender of their choice. Be sure to work with a lender who provides the most competitive package, taking interest rates, customer service, and refinance fees into consideration.
Some lenders also have lender specific fees. As the borrower, give the lender pushback to get a lower fee. For instance, if the lender is charging an application fee, ask for that fee to be waived. You’d be surprised what someone is willing to give just to earn your business
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Considering a mortgage could be the largest financial obligation one will have over their life, you must be very careful and aware of what you’re getting yourself into. Refinancing can save you money if done properly, but it can also go against your financial best interest.
Some people choose to refinance their mortgage as a way of financing other life expenses. Although this can be a huge advantage, it can also be a huge disadvantage if you truly can’t afford those other life expenses. Just because the equity is in your home doesn’t mean you need to cash it in!
If your existing interest rate on your mortgage is less than the refinanced interest rate, it may not be in your best interest to refinance your loan. Interest is a meaningful expense, and spread out over the loans term, an increase of just $50 - $100 a month can be a significant expense.
Last but not least, if you’re refinancing your loan to save money each month, consider how long you plan on staying in your home for. If your current mortgage is $2000/month, and your new mortgage under a new interest rate is $1850 a month, you may be excited thinking you can save $150 a month. However, you must keep in mind the fees associated with refinancing. If you paid $5,000 in refinancing fees, it would take you just about three years to recoup that money ($5,000 / $150 = 33.33 months). Not to mention that $5,000 could have earned interest over the years, so there is also a lost opportunity expense worth considering.