What Are The Costs of Refinancing?
The fees described below are the charges that you are most likely to encounter in a refinance. Of course, costs vary from area to area and from lender to lender. Your actual closing costs may be higher or lower than the ranges indicated below.
Application Fees
This charge imposed by your lender covers the initial costs of processing you loan request and checking your credit report.
Title Search
Even though a title examination was completed when you purchased or previously refinanced your home, a title search must be done before refinancing to ensure clear title. The title search covers the cost of examining the public land records to confirm clear ownership of real estate.
Title Insurance
The title insurance fee covers the cost of the lender's title insurance policy. This title insurance insures the policy holder for a specific amount, for any loss caused by title discrepancy. Sherriff & Sherriff may be able to arrange a reduced fee rate under certain circumstances. This discount can include up to a forty percent (40%) discount on the title insurance premium.
Estimation of Costs
Because costs may vary significantly from area to area and from lender to lender, the following are estimates only. Your actual closing costs may be higher or lower than the ranges indicated below. These figures are provided to give you a rough estimate of costs.
Application Fee.....................................$75 to $300
Appraisal Fee.........................................$150 to $400
Survey Costs..........................................$125 to $300
Homeowner's Hazard Insurance.....$300 to $600
Home Inspection Fees.........................$175 to $350
Loan Origination Fees..........................1.0% of loan
Mortgage Insurance..............................0.5% to 1.0%
Points........................................................1.0% to 3.0%
Additionally, all lenders will require title insurance coverage for each new loan. Please contact us for rates. All rates are dependant on the total principal of your new loan, less any discounts that you may qualify for.
Loan Origination Fees and Discount Points
The origination fee is charged for the lender's work in evaluating and preparing your mortgage loan. Discount points are prepaid finance charges imposed by the lender at closing to increase the lender's yield beyond the stated interest rate on the mortgage note. One point equals one percent of the loan amount. For example, one point on a $75,000 loan would be $750. In some cases, the points you pay can be financed by adding them to the loan amount. The total number of points a lender charges will depend on market conditions and the interest rate to be charged.
Appraisal Fee
This fee pays for an appraisal which is a supportable and defensible estimate or opinion of the value of the property.
Prepayment Penalty
A prepayment penalty on your present mortgage could be the greatest detererent to refinancing. The practice of charging money for an early pay-off of the existing mortgage loan varies be state, type of lender, and type of loan. Prepayment penalties are forbidden on various loan including loan from federally chartered credit unions, FHA and VA loans, and some other home-purchase loans. The mortgage documents for your existing loan will state if there is a penalty for prepayment. In some loans, you may be charged interest for the full month in which your prepay your loan.
Miscellaneous
Depending on the type of loan you have and other factors, another major expense you might face is the fee for a VA loan guarantee, FHA mortgage insurance, or private mortgage insurance. There are a few other closing costs in addition to these.
Conclusion
In conclusion, a homeowner should plan on paying an average of 3 to 6 percent of the outstanding principal in refinancing costs, plus any prepayment penalties and the costs of paying off any second mortgages that may exist. One way of saving on some of these costs is to check first with the lender who holds your current mortgage. The lender may be willing to waive some of them, especially if the work relating to the mortgage closing is still current. This could include the fees for the , surveys, inspections, and so on.
The information contained herein is intended to help you ask the right questions when considering refinancing your loan. It is not a replacement for professional advice. Talk with mortgage lenders, real estate agents, and other advisors about lending practices, mortgage instruments, and your own interests before you commit to any specific loan. Please feel free to contact us at any time for more information. If we are unable to answer your questions, we can direct you to someone who can. Call us at (203) 226-9800 or email us.
