Knowing Refinancing Costs of Mortgages

2007-03-08 10:33:40

( Financial )



The only way to determine whether refinancing is for you is by analyzing the time and cost factors. You should know the answers to the following question before considering refinancing mortgages.

How much will you pay in upfront refinancing costs? Refinancing costs are the same costs you paid on your first mortgage. Refinancing cost include the following upfront fees: loan application fee, credit check fee, title search fee, title insurance fee and attorney’s fees. Discount points are also additional refinancing costs which require you to prepay interest on your mortgage. These discount points will also help you permanently lower your refinance rates of interest and more points will be better if you’re planning on staying in your home for more than a few years.

How long do you plan to stay in your house? Financial advisors recommend refinancing mortgages from adjustable-rate mortgage to fixed-rate mortgage if rates drop and you’re planning to stay in your home for more than a few years. Adjustable-rate mortgage usually offer low interest rates at the start but expose you to risk of higher interest rates later.

How many years remain on your current mortgage? Refinancing mortgages is not advisable if you are a few years into your mortgage and have paid off a substantial part of the interest. When you refinance you’ll go back to paying mostly interest. This will delay repayment of the principal and building equity in your home.

How fast do you want to build equity in your home? You may choose to refinance from a thirty year mortgage to a twenty or fifteen year mortgage to pay off your mortgage faster and build equity in your homes. Using a home equity loan, you will be able to borrow money at low interest rates and deduct this interest from your income tax return!


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