Understanding the Costs of Refinancing
Chances are, if you own a home, you receive many solicitations each month trying to convince you to refinance your mortgage. These can seem like they would be an excellent way to save money on your mortgage payment each month or allow you to take out some money up front that you need for home improvements and other obligations. However, there is no such thing as a free lunch. There ARE costs associated with refinancing. We have put together a brief list of some of the most common ones you will encounter.
- Mortgage Application Fee – When you refinance, you close your current mortgage and open a new one. The fee to do so will usually be around $250 to $500.
- Appraisal Fee – Lenders usually require an appraisal to determine how much your home will refinance for, especially if you plan to take cash out of the loan. This amount may be $300 to $600.
- Origination Fee – This is often the most expensive part of refinancing. The standard rate is 1% of the loan. So, if you were refinancing $150,000, you would have $1,500 in origination fee costs.
- Document Fees – These costs can include preparation fees, title search, title insurance and recording fees. If you look at the expenses in your refinancing paperwork, they will normally be detailed line by line, but expect the total to be another $1000 plus!
Just because there are costs included doesn’t mean that refinancing is not a smart decision. In many cases, you can recoup those costs, especially if you plan to keep the loan for a longer period of time. If you think that refinancing is right for you, reach out to us at Liberty Financial in Louisville, Kentucky. We would love to show you the benefits and the costs in a simple, no-nonsense manner.
Our experts can help you understand the process and decide on the best way to proceed. We look forward to working with you!