Refinance Closing Cost - Will Refinance Closing Cost Rates Save you Money - What is Refinancing, and is it Worth It?

With the decrease in mortgage rates, millions of people consider refinancing their homes to save money on their home costs. The truth is, most of these people are signing into new mortgages that will end up costing them more in the long run. When renegotiating your mortgage to take advantage of lower interest rates, take a close look at refinancing closing costs to ensure you are not paying more than your mortgage is worth.

What is Refinancing, and is it Worth It?

When you decide to refinance your home, you are paying off your existing mortgage and replacing it with a lower interest loan. This seems like a great way to save money on the overall cost of your interest rate. The problem lies in adding in the refinancing closing cost to the total payoff value of the home. In most cases, you will end up paying more than your initial mortgage once the closing costs are added to the bottom line.

The Hidden Fees of Refinancing Closing Costs

Closing costs are a combination of several fees associated with the closing of your mortgage. During this process, you will be charged for everything from processing and attorney fees to title searches and early payment penalties. Prior to signing any paperwork, you will receive a cost estimate for the charges associated with the closing cost. Look at these figures carefully to decide if you will break even with a new mortgage.

Application fees are associated with every closing on a mortgage. These fees usually range between $100 and $400, depending on the company you use. Legal fees are also necessary and should cost around $300. These fees can be negotiable, and you should talk to your lender and attorney to see if the fees can be reduced. You will also have to pay a fee to the title company, as they will have to do a title search to make sure you are the owner of the property and there are not any liens in place.

Each loan is also assessed a processing fee, which is determined by the amount you are borrowing. You may also be charged a penalty by your existing mortgage company for early payment of your loan. The prepayment fee is dictated in your initial loan papers, and you can find the amount charged by calling your current lender.

There are several companies who offer “no closing cost” options. Be wary with these companies, because there are usually fees associated with the preparation of the loans that are equal to or greater than the closing fees. While they are not considered closing fees, they are fees nonetheless, and they can add up.

When you consider closing costs, refinancing may not be the best option for your situation. While refinancing your home could save you money in regards to interest rates, you must look carefully at all charges before entering into an agreement. Make sure you are actually saving money after all costs have been taken into consideration.