Refinancing your current mortgage is a wise financial decision
if you can recoup the costs of a refi. An average refinancing
deal, you can expect to pay between two and six percent of the
loan amount if fees and points. On average if you can lower your
interest rate by two points, then you will usually come out
ahead in the end.
Normal Mortgage Costs
Refinancing your home is just like taking out your mortgage the
first time. All the loan costs you paid for your original
mortgage, you will have to pay again. Usually these had up to
$2000 in fees plus at least one point. Fees will be included for
application, appraisal, survey, attorney review, and title
search.
Besides the loan origination fee of 1%, you can also expect to
pay a couple of points for lower rates. Points are flexible
though. You can choose to pay no points for a higher rate, or a
couple of points for lower rates. Base your decision on how cost
effective points would be. Using an online mortgage calculator
can help you figure the costs and savings of each option.
Extra Fees For Refinancing
Besides regular mortgage fees, you may get stung on a prepayment
penalty or private mortgage insurance. Prepayment fees are
prohibited on federally back loans, such as FHA or VA mortgages.
Some states also limit prepayment fees. Check your current
mortgage before deciding to refinance.
You may also be hit by private mortgage insurance (PMI) if you
decide to take out your equity. This can add up to several
hundred dollars a year. But if you have a government backed
loan, you don't have to worry about this issue.
How To Decide
When you are trying to decide on whether to refinance or not,
take a look at your loan and home goals. If you plan to stay in
the home for several years, then you have the time to recoup
costs.
You can also request quotes from mortgage lenders to see what
kind of deal you can get. With no commitment on your part, you
can take a look at rates and points that are being offered.
About the author:
See my recommended
Home
Mortgage Refinance Lenders for the lowest rates online.
Carrie Reeder is the owner of ABC Loan Guide, which offers help
finding
low rate home
mortgage loans.
