Save Thousands on Your Next Mortgage

How to Cut Refinance Closing Costs – Tips from a Pro

Confused about refinance closing costsBecause most people only refinance once every few years, closing costs are an unfamiliar concept. But learning about closing costs is key to maximizing your overall savings on your next mortgage refinance loan.

To save on mortgage closing costs on your next refinance, follow these five tips:

1. Go through your closing costs line by line with your mortgage loan officer.

Don’t just look at the bottom line number.  Go through every expense and you and your loan officer may find costs for services you do not need or charges that can be reduced by shopping around. Use the Good Faith Estimate of Closing Costs that the federal government requires all mortgage lenders to provide mortgage applicants.

2. Select the mortgage interest rate and point combination for your individual needs.

Points – one point is equal to one percent of the loan amount – can be a refinancing homeowner’s largest closing cost.  Obtain zero point mortgage rate quotes from your mortgage loan originator and compare with other zero point options.  While slightly lower mortgage rates are available by paying points, most borrowers move or refinance before recovering the up-front cost of paying points.

3. Ask for discounts from your mortgage loan originator.

 Just ask your mortgage loan originator if there is any way to reduce closing costs to make the deal and you will find most will probably come up with a couple hundred dollars in savings.

4. Make sure you get your refinance title insurance discount.

You paid for a full title insurance policy when you purchased your home.  When you refinance, update your existing title policy and you will save 40% off the cost of a new policy.  The key is to make sure you find your actual title insurance company (not closing agent) which you can find by looking at the closing paperwork from you last closing.  It should be right on your HUD-1 closing statment.

5. Get it all in writing

No matter what deal you cut on your refinance closing costs, make sure you get it in writing. If any costs changes between application and closing, your lender is required to provide you with the changes in writing and give you a chance to cancel the transaction.

While reviewing mortgage closing costs for your refinance can be tedious, the cost savings can reach into the thousands of dollars so the effort is worth it.

 

 

 

 

. When you purchased your home, you paid for a brand new title insurance policy which is required for your loan. When you refinance, you can get a discount of about 40% off the cost of a new policy. While most lenders will help you get this discount, you need to ask for it to make sure you are getting it.

 

 

• Get it all in Writing

 

. New federal regulations require that borrowers be given an estimate of closing costs and that the lender cannot collect any type of application or appraisal fee until three days have elapsed. In addition, if there are any changes at all to the closing costs before closing, borrowers have additional time to review and accept the changes. Despite the new regulations, it always pays to get all closing costs in writing and ask the lender to commit to keeping those costs the same.

 

 

Some items that you see on your estimate of closing costs are not really costs but adjustments to transition from the old loan to your new mortgage. For example, many people think that by closing their loan at the end of the month that their refinance will cost them less because their interest adjustment will be lower. But what they are forgetting is that the lower their interest adjustment is on their new loan, the higher the daily interest add-on will be on their old loan.

On the positive side, adjustments for escrows for taxes and insurance look like they cost a lot because you need to set up your new escrow account with the new lender at closing and you do not get your old escrow account back until a few weeks after your closing. For example, if you see on your closing statement that you need about $3,000 for property tax and insurance escrows, you will probably have about that much in your existing escrow and you will get it back once your old loan has been paid off. So in reality your escrow adjustments did not cost you anything extra.