Refinance Closing Costs: Let the Buyer Beware

2007-03-08 10:33:40

( Business )



BALLPARK FIGURE

People have this notion that if they were to refinance their mortgage it would immediately solve their financial woes. They may be expecting too much.

Indeed refinancing can be a lot of help especially because most refinancing programs have better loan terms than your existing one. That is why you go into refinancing in the first place.

But you should be aware that refinancing also has a downside. Refinancing closing costs can be staggering if you were not informed of it ahead of time. The problem with closing costs is that it is difficult to generate an exact figure. The best that lenders can do is provide you with an estimate of your total refinance closing costs, but this estimate can be off by a significant amount of money.

OPTIONS FOR CLOSING

Closing costs are the charges that you have to pay in order to totally close the mortgage. These include charges from the mortgage provider, and government fees such as property taxes and home insurance. Some refinance closing costs are one-time charges, while others are recurring over the lifespan of the loan.

If you want to refinance but are concerned with closing costs, you have several options. Some lending companies will give you the choice to incorporate the refinance closing costs into the remortgage program. This means that your monthly dues include the payment for the closing costs, or at least most of them.

Another option is to go for no closing costs package, but this is only available for loans in excess of a certain amount. If your refinance meets the cut-off amount, then you qualify for a no closing costs plan.

Any which way, you should be prepared with some amount of cash when you are about to close your loan. This is to cover any unexpected fees which may turn up at the last minute.


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