Refinancing Costs Should Be Recouped

2007-03-08 10:33:40

( Financial )



When you borrow from a bank, you are asked to pay the loan cost of processing. Whether the loan is a low cost loan or some low cost personal loans, you have to pay certain costs for the transaction. If this is a first mortgage, you cannot avoid the loan cost and it becomes part of your investment in your house. But if you are considering refinancing, then you should remember that refinancing costs must be recovered.

You are supposed to save on monthly payments when you refinance. But to get those savings, you invest money which is equivalent to the money you pay for the mortgage refinancing costs. Therefore, you should weigh if the savings generated will be greater than the refinancing costs.

Refinancing costs involve payments for loan points, property valuation fee, credit report and all the other charges you paid for when you obtained your first loan. Refinancing is taking out a new loan all over again. The costs can be substantial and should be justified by your savings. You can quickly calculate for the net savings using a refinance calculator that should be available on your mortgage lender’s website.

But if you are considering a loan or refinancing, do shop around not only for favorable interest rates. There are lenders who can offer you a no cost loan or a no cost mortgage.

If you have a particularly favorable credit, some lenders may be willing to shoulder the loan cost of processing instead of charging you for it. This is common especially in second mortgage transactions because you already have an established record and the value of your property may already have increased.

You should try to get a no cost mortgage on the refinancing, then you’ll have no payout for refinancing costs and you’ll realize greater savings.


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