Refinancing a home is the process whereby home owners apply for new mortgage plans to replace the original mortgage. Here, the initial loan is paid off by the new refinancing plan. Home owners can opt for mortgage refinancing for quite a number of reasons including better interest terms and rates, to cash out portions of the home’s value, to banish Private Mortgage Insurance or even to avoid balloon payments among other reasons. Before you decide on refinancing, you need to fully understand the costs so that you may make the best decision.
Cost of Refinancing a Home
Refinancing costs vary a lot depending on a number of factors. However, the general costs that you should be ready to incur include the following;
· Application fee – Lenders will charge you application fees to cover for the costs of doing background checks on your credit report and also the initial costs of processing the new loan.
· Title insurance and title search fees – You will also have to pay for title insurance and title search fee to cover for the policy that will be issued by the title insurance company. It also covers for the costs of checking and verifying the property’s ownership in public records.
· Attorney fees – Such transactions require an attorney who represents both the lender and the borrower. Normally, lenders leave this cost to the borrower so you must also be prepared to foot this cost including any other legal fees that may be required in the loan procession.
· Points and fees incurred in loan origination – You will also be required to cover for the costs arising from points and fees that may be incurred in loan origination. Points refer to financial fees imposed by lenders at closing while origination fee is the charge imposed by the lender for the work they do in preparing and evaluating the mortgage.
Even though these are the major costs that you may incur when seeking mortgage refinancing, there may arise other charges including taxes, appraisal fees, insurance transfer fees, e.t.c. It is also worthy to note that these fees may vary depending on a number of factors so it is important that borrowers seek full clarification on their variations so that they may make the best decision regarding the mortgage refinancing plan and also to avoid inconveniences in the future.