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Tuesday, September 9, 2014

Cut Refinancing Expenses

iStock_000016148905XSmall(er).jpgEvery single day, homeowners who are excited about lowering their rate have a tendency to ignore the refinancing costs because they’re being rolled back into the new mortgage. If the payment is lower than what they’re currently paying and there’s no money out of pocket, it seems like a good deal.

Refinancing your home because a lower rate is available is one thing but the closing costs associated with that new loan could add several thousand dollars to your mortgage balance. By following some of the suggestions listed below, you may be able to reduce the expense to refinance.

  • Tell the lender up-front that you want to have the loan quoted with minimal closing costs. 
  • Check with your existing lender to see if the rate and closing costs might be cheaper. 
  • If you’re refinancing a FHA or VA loan, consider the streamline refinance. 
  • Shop around with other lenders and compare rate and closing costs. 
  • Credit unions may have lower closing costs because they are generally loaning deposits and their cost of funds is less. 
  • Reducing the loan-to-value so that mortgage insurance is not required will reduce expenses. 
  • Ask if the lender can use an AVM, automated valuation model, instead of an appraisal. 
  • You may not need a new survey if no changes have been made. 
  • There may be a discount on the mortgagee’s title policy available on a refinance. 
  • Points on refinancing, unlike purchase, are ratably deductible over the life of the loan. 
  • Consider a 15 year loan. If you can afford the higher payments, you can expect a lower interest rate than a 30 year loan and obviously, it will build equity faster and pay off in half the time.
A lender must provide you a list of the fees involved with making the loan within 3 days of making a loan application in the form of a Good Faith Estimate. Every dollar counts and they belong to you.