subject: Understand Closing Costs [print this page] One of the surprise expenses for most first house buyers is the total closing costs. It is important to understand the costs in advance, because if you are refinancing to save money on a lower rate, the closing costs may wipe out your savings.
You would anticipate that the lender to charge something for creating a new mortgage. A lot of these charges are not under the control of your bank, since they are charged by third parties, but there are some charges that they do control, and will adjust if they really want your business.
or inspections -Title search -Credit report
Or more, depending upon the state.
One of the first questions you may ask is whether or not you can reduce these costs. 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 involved in the closing of your mortgage are not under the control of the bank, such as the appraisal fee, the legal fees, etc.
The first step you should take to find out whether you can reduce you closing costs is to get a good faith estimate of the costs. Be careful that your lender has not offered you a great loan rate, but then padded the closing costs to such an extent that they recover the difference.
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.
Don't forget that the new loan will now also cost all of the closing fees you will have, so add them to the calculation. You will now know whether or not a re-financing is a good idea or not. This is not a lot of trouble to go to since it may save you a substantial amount.
