In the article I’ll tell you about why it is important to Avoid Paying Mortgage Refinancing Closing Costs. When considering refinancing your mortgage you first need to consider the closing costs and how it is going to be paid. The closing cost or a mortgage refinance can run upwards of a couple thousand dollars so you want to make sure you either have that money laying around or are willing to use one of the following two methods to avoid paying for the closing cost.
Before I get into the two methods that you can use to not pay for the closing costs up front I want to make sure you understand why you are planning on refinancing your mortgage. The only reason you ever want to refinance a mortgage is to get better terms, or take money out while getting better terms. If this is not the reason for you refinancing your home then you may want to reconsider what you are doing.
Roll Closing Cost Into Principal
This is a great method to avoid having to pay the closing cost at the loans closing. In this method all you have to do is ask the lender to increase the size of the loan by the amount of the closing costs. The nice part about this is you get out of paying for the closing cost up front and you will simply have to pay a slightly higher monthly payment for the life of the loan. If you break down the payment you will most likely be paying under $10 per month.
Getting the lender to roll the closing costs into the loan is a great idea for two reasons. First it is good because you don’t have to use your own money to pay for the refinancing of your home and therefore you will have more money to do what you want with. The second reason this is a good thing to do is because paying under $10 per month for something that will save you much more money is not only a good thing for your bank account bit it is a smart long term financial decision.
Avoid Costs All Together By Increasing Interest Rate
Increasing interest rates is not really the method that most people choose and the reason is because it sounds like a bad idea. When you think about increasing interest rates on your refinanced loan it seems like it would cost more but really it is pretty close to rolling the cost into the principal. Both of these methods cost about the same and they are both a little higher than paying the fee up front, but they are better than giving all your money away at first.
Now I understand that you aren’t sure why anybody would choose to increase their interest rate as opposed to rolling the cost into the principal and the reason people do this is because often times people can’t get approved for the extra amount or they don’t want to have to pay private mortgage insurance. All in all when it comes down to the best financial decision it would have to be rolling the closing costs into the principal, but when you have no other choice increasing the interest rate is still a good option.