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What Mortgage Refinance Costs Will I Be Charged?
By EchoBay Loans Staff Writer

Refinancing your existing mortgage to obtain a lower interest rate can save you thousands of dollars. However, anything worth having usually doesn't come free. Many homeowners are surprised to find out that refinancing to save money actually costs money. However, that may very well be money well spent considering that refinancing can save tens of thousands of dollars over the life of a mortgage if the interest rate drop is substantial. To fully understand how much it will cost you for a mortgage refinance, you first need to know and understand all of the costs involved.

Refinance costs are not completely unfamiliar territory. These costs are actually quite similar to the costs you incurred when you took out your existing mortgage. Although, costs associated with refinancing may be rolled into the new amount of the loan rather than being paid by you at closing.
These dollar amounts can really add up, so knowing what to expect and which costs to compare can go a long way in saving you a lot of money.

With traditional lenders, the first mortgage refinance cost that you will incur is that of an application fee. This fee usually ranges from $200 to $400. The application fee is paid to the lender to process your mortgage refinance application. Unless you want to throw away money, your lender should be pretty sure that you will be approved for the refinance before charging this fee. Application fees are usually not refundable. While not all companies charge this fee, many companies do and it is becoming increasingly popular.

Once you have begun the application process, you will need to have your home appraised at your expense. Before having an appraisal done, you will need to find out if the lender will arrange for the appraisal and you will pay them, or if you need to arrange for the appraisal on your own and pay the appraiser directly.

If you can arrange for the appraisal on your own, you will be able to shop around for a good rate. However, if you are required to use the appraiser designated by your lender, you will be stuck paying whatever rate they charge without room for negotiation. Appraisal rates very depending on the type of property you own and where you are located, but they generally run from $200 - $500.

The most substantial mortgage refinance cost is usually that of points. Points are usually paid in order to obtain a lower interest rate. While there are no-point loans available, if you're refinancing with the goal of obtaining a lower interest rate, you're more likely than not going to wind up paying points. The more points you pay, the lower your interest rate will be. Each point will cost you 1 percent of the amount of your loan, so if you are refinancing a mortgage of $100,000, two points would cost you $2,000, three points $3,000, etc.

The loan origination fee is another costly expense that you will incur with your mortgage refinance. This fee is what is charged by your lender or broker for processing your loan. It's very important to shop around for a company that charges a low origination fee since the fee is usually based on a percentage of your loan amount. Some companies will only charge 1 percent, while others will charge 2.5 percent. Don't pay more than you have to. Since the companies charging more aren't usually offering more services for their increased rates, there's no reason to throw this money away.

Some of the other mortgage refinance fees that you might expect to incur include title search fees, title insurance costs. Your lender may even charge you for the cost of their attorney. Make sure that you compare these fees between lenders to ensure that you are getting the best deal possible. By understanding the rates involved, you won't be hit with any unpleasant surprises when the actual mortgage refinance comes.


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