The article concerns the question – What will home loan refinancing cost you? Refinancing a mortgage can be an excellent way to remove oneself from a loan that no longer suits one’s purposes, or one that turned out to be a poor and unwise decision. It is also a way to reduce one’s payments in times of trouble, and a way to own a home sooner when finances are better. Indeed, mortgage refinancing means different things to different people, and there are many reasons to refinance a mortgage.
Refinancing will cost you money, though, the question being “how much”. For the most part, refinancing, one where a mortgage is being renewed due to the term expiring, the costs may just be a renewal fee. On the other end of the scale, refinancing could cost several months of interest payments, broker’s fees, origination fees, and administrative costs. Remember also that it is wise to have a lawyer of your choice review the documents, so these are funds that you are going to need in order to refinance. You might even have to add these costs to the total mortgage if you do not have cash in the bank.
When you refinance, you generally have to pay off the existing mortgage. But it is not a simple case of finding out how much principal is owing as most contracts have penalty clauses and administrative fees. Once the original lender calculates the payout figure, you will owe more than the outstanding amount on your mortgage.
Then, if you engaged a broker to find the refinancing for you, once the mortgage closes, the fees will be due for this service. The fee may be a set number, or it could be a percentage of the money obtained. Again, like the lawyer’s fees, if you you do not have the cash to pay upon closing, you will need to add these figures to your total new mortgage. As you can see the costs are mounting.
Finally, the lender might have fees to process the loan. The lender’s lawyer will draft the contract and the lender is not going to pay for that. That is your cost to refinance. Also, some banks charge origination fees but they have been known to drop the fees if they think you are taking your business elsewhere.
Further, although this is not a direct cost to home loan refinance, but certainly an expense to you nonetheless, the lender is going to request proof that the property taxes are paid and the insurance is in good standing. If either of these are in arrears, the funds will be needed to close the deal and bring everything up to date. If you are short on cash, you may be adding these costs to the mortgage refinance as well.
Indeed, there is a cost to refinancing. Each person will have different circumstances and amounts, but for most people it could be thousands of dollars.