Closing Costs? What Are They?

One of the surprise expenses for most first home buyers is the total closing costs

. It is important to understand these costs, especially if you are considering re-financing your home, since any savings on a new rate may disappear once you have to pay the closing costs on a new mortgage.

You would anticipate that the bank to charge something for creating a new mortgage. In general, many of these expenses are not determined by the bank, but are fees they are charged and pass onto the borrower. There are some costs over which the bank has control, and if they are aggressively seeking new loans, they may reduce or eliminate them.

The closing costs you can expect are : -Application fee -Origination fees (or points) -Attorney fees -Transfer taxes -Recording fees- -Appraisal -Surveys and

Or more, depending upon the province.

If you are concerned about these expenses, you may be able to control some of them to a certain extent. In certain markets, banks may be willing to reduce or eliminate fees that they themselves charge, such as application fees. But many of the fees connected with the closing of your mortgage are not under the control of the bank, such as the appraisal fee, the legal fees, etc.

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.

You can get closing estimates from other banks as well, and make a comparison between each item. If some of the fees seem especially high, your bank may be inflating the fees. As examples, the fee for a credit check should be fairly standard, and within the same geographic region, there should not be too much variety in appraisal fees. You can bring these discrepancies to your bank's attention and ask for reductions to the norm.

After you have negotiated lower closing costs as much as you are able, 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.

Now compare your existing home loan total cost balance against the new loan's total costs, adding the closing costs to your new loan. Now you will know whether the lower rate is worth while. You will discover that this exercise is well worth the time and trouble.

by: Leland C. Hadley

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