Refinancing your home loan is one of the best ways to save money, especially if your original mortgage was set with a high-interest rate. By refinancing your home, you can significantly reduce the interest rate and, in turn, your monthly payments. In some cases, you can even get rid of mortgage insurance this way.
Even so, all those savings won’t add up that much due to the high closing costs of a new mortgage loan. This is the reason why not a lot of homeowners choose to refinance their homes. The good news is, closing costs are negotiable even when refinancing your home. This guide can help you figure out how you can lower your closing costs and take full advantage of those savings.
What are Refinance Closings Costs?
Basically, there are lender fees and third-party fees you pay when getting a mortgage. This is what’s called closing costs. You have to pay these fees on a refinance, just like you did on your original mortgage.
What you need to remember is that closing costs aren’t a fixed amount. They vary greatly, depending on where you live, the amount you’re borrowing, the lender you decided to work with, and the loan program itself. To give you a better idea of what these closing costs are, here are examples of third-party fees you’ll probably need to pay during a refinance:
- Loan Origination Fee – 1% to 1.5% of the loan amount
- Home Appraisal Fee – $500 to $1,000
- Survey Fee – $150 to $400
- Attorney Fees – $500 to $1,000
- Processing or Underwriting Fee – $300 to $900 each
These are just some of the usual closing costs involved in the sale and refinancing of a house. Of course, there are other costs associated with a real estate transaction, and they may vary depending on the amount.
How to Negotiate Closing Costs on a Refinance?
When negotiating the closing costs of your refinance, it’s essential to first understand which parts of your mortgage do you want to save some money on. Here’s what you need to do to negotiate all those closing costs.
Ask for Loan Estimates – A Loan Estimate form essentially provides itemized information about mortgage fees and services. To give you a more detailed look at those initial quotes you requested, you can ask for a loan estimate early as soon as you’ve applied for a mortgage. With an estimate, you’ll know exactly the terms of your new home loan, including interest rate, loan amount, and monthly mortgage payments.
Look for No-Closing-Cost Mortgages – Believe it or not, but there is such a thing as a loan with no closing costs. Some lenders don’t require borrowers to pay upfront for closing costs. Instead, they roll it into the new loan amount to spread the fees over the life of the loan. However, this could easily result in higher interest rates.
Ask for Waivers, Discounts, and Rebates – As much as possible, ask for anything that can lower the closing costs so you can get the best deal. You can do this by asking which fees can be discounted or even waived altogether. There may also be some rebates or incentives in place, so don’t be afraid to ask.
Your Refinance Expert in Phoenix
Negotiating the closing costs of your refinance can be quite beneficial and help you save even more money. These tips should help you find a good deal for your refinancing and make the most out of your new mortgage.
Desert Springs Mortgage is your trusted mortgage broker in Phoenix, AZ, offering some of the best loan programs for our clients. We are licensed throughout the states of Arizona, California, Colorado, Oregon, and Washington. So, if you’re looking for the best deals and mortgage rates in Phoenix and the surrounding areas, we are the ones to call. Contact us at (623) 432-1309 or through our website to get a free quote!