One of the surprise expenses for most first house buyers is the total closing costs. Many times, people may be tempted to re-negotiate their older, higher rate mortgage when rates come down. It is important to consider this carefully and make sure any savings you have are not eaten up by the closing costs on the loan.
When a bank establishes a mortgage, there are expenses to do so. Needless to say, the bank is not going to absorb these costs, but rather pass them on to the borrowers. (Although, in competitive loan markets, lenders have used lower closing costs as a factor to attract new borrowers, by absorbing part of the fees.)
or inspections -Title search -Credit report
There may be taxes and other fees by the state as well.
As a prospective re-financer, you may want to know which of these fees can be reduced, or even eliminated, such as their application fee, and which are not under the bank’s control. As we mentioned, sometimes lenders are aggressively seeking new clients, and they may have special programs where certain fees are waived. The application fee is the most often waived, since this is a charge the bank itself makes. Other fees, that are just pass-through fees, such as attorney fees or appraisal fees are not likely to be waived.
One of the first steps you should take is to get a good faith estimate of the closing costs. Then you can analyze them. One of the dangers of being offered a lower rate may be that the bank inflates the closing costs to make up for the lower loan rate.
If you do find that any of the costs are not in line with market rates (you can call another bank and ask them what their fees are-this will apply in some areas, such as an appraisal or a credit search, or you can file another application and get another good faith estimate), call them on it and request to negotiate the item.
After you have negotiated lower closing costs as much as you can, you should now make sure the deal is worth it. Mortgage calculators are available on the net, and you can calculate the total cost left on your present loan and the total cost of the new loan.
This is not too difficult, since you just have to enter the numbers for your present mortgage, and the new mortgage you are thinking about, adding the closing costs, of course.
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