4 Tips for Saving on Your Refinancing Closing Costs
Just as when you first attained your mortgage, when you refinance your mortgage you will have a number of refinancing closing costs that you will have to pay. While you will invariably have some refinancing closing costs that you cannot evade, there are ways that you can save some money. Here are four tips to help save money on your refinancing closing costs:
Tip #1 – Since the bulk of your mortgage payment goes toward paying down interest, and not to the principle, to save the most money on your refinancing you want to find the lowest rate possible. Some lenders will want you to pay “points” at your closing to bring your interest rate down. However, you can possibly find a lower rate without having to pay the thousands of dollars in points if you do your homework and work with a reputable mortgage broker or two. You can use multiple brokers and compare the various fees each charges you.
Tip #2 – While numerous lenders today are offering “no closing costs” mortgages, this is a very deceptive marketing tactic. While you may very well have no out-of-pocket costs at the closing table, you will be paying more for your loan in terms of a higher interest rate for the next 15-30 years. This means that as you may save a couple thousand dollars in refinancing closing costs, you will be paying tens of thousands of dollars more for your loan as the years go by. The tip here is to read the fine print and understand what “no closing costs” really means.
Tip #3 – For every mortgage out there the lender is required to supply you with a Good Faith Estimate which lists your costs. On the Good Faith Estimate, you will find the fees for the lender, broker and appraisal fees. Compare this Good Faith Estimate to another one to make sure that all of the fees look reasonable. There are usually a lot of “junk” fees, such as “document origination” fees which you can negotiate to have removed completely. However, it is important to understand that a few fees are necessary to pay for your refinance.
Tip #4 – The most important thing you want to do is to get everything, and I mean EVERYTHING, in writing. Never take the word of a mortgage broker or title company without getting everything in writing. The last think you want to do is get into the closing meeting and find out that your mortgage has a ton of fees and charges that you were not expecting. Many people will simply sign their papers rather than be embarrassed and ask for changes or cancellation of the loan.
While every refinance has closing costs to pay, you can lower these costs by educating yourself and understanding which closing cost fees are reasonable and which are not. Work with a broker, or multiple brokers, and find the best lending program to meet your needs. Use their professionalism to get you the best deal. Don’t buy into the “no closing fees” sales pitch and understand that you will actually pay more for one of these loans. Read and compare your Good Faith Estimate and make sure it does not contain any junk fees. Get everything in writing and you should have no unpleasant surprises at the closing table.
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