If you're ready to refinance your mortgage in order to get better rates and make lower payments, the process is somewhat similar to the original mortgage application steps. Fortunately, refinancing can save you a lot of money in the long run, but it does require some legwork and some extra money up front. If you've made the decision to refinance, there are some costs you should know about before you contact the lender. Here are some of the expenses you will most likely have in order to get refinanced.
Just like when you applied for a mortgage the first time, a new application will need to be submitted. There is a cost associated with this for some lenders since they will need to pay for an updated credit report and a new appraisal on your home. The fees might also cover some administrative costs. You may end up paying a few hundred dollars for the application, so make sure your home and credit are in good shape before applying.
Loan Origination Fees
Most lenders will charge an origination fee, which is also called the processing fee. This is usually a percentage of the total loan amount. These fees can vary but are typically about one percent of the total new mortgage cost. Find out which lenders have the lowest origination fees to help you save money when refinancing. There may also be a small document preparation fee tacked on as well.
Before you decide to refinance, find out if your mortgage has a prepayment penalty fee. These fees can be quite high and may counteract the benefits of refinancing in some cases. Read the fine print and call your lender to determine if you have these penalties included in your mortgage since they can be quite costly and might not make refinancing feasible for some people.
In order to determine the current worth of your home, the bank must do an appraisal to determine the current market value. This appraisal fee is sometimes additional but, as stated before, may be part of the application fee. Find out if there will be a separate appraisal fee or if it's included as part of the initial application. If it is not included, expect to pay several hundred more dollars for the appraisal to be conducted.
There may be a few other costs associated with refinancing a mortgage. Some of those costs may include a title examination, flood certificates, pest examinations, tax fees and others. Always talk to your lender and have them explain to you all of the different costs before you refinance. This will help you make an educated decision as to whether or not the refinancing option is best for you. Contact an establishment like Saginaw Medical Federal Credit Union to learn more.