Home Mortgage Refinance Loan Costs

Save Big Despite Home Refinancing Loan Costs

Homeowners are increasingly looking to refinance their current home mortgage loans in order to lock in lower interest rates. When you refinance your home loan, you take out a new loan that replaces the current loan. This refinanced loan allows you to get a better rate and can help lower your monthly mortgage costs. Borrowers generally look to a refinance loan option to take advantage of falling interest rates, get rid of lingering credit card debts, to make home repairs or improvements and to make use of the equity in their homes in the form of a cash back refinance loan.

No matter the type of refinance loan you're looking into, a refinance loan is still a loan and there will be costs associated with refinancing your current home mortgage. Here are some of the more common refinance loan costs.

Credit reporting fees: Before a lender will refinance your home he will pull your credit report. Though your credit report was originally examined when you received your primary mortgage this is a new loan and possibly a new lender. The lender will use your credit report to review your history of paying bills on time and if you're able to meet minimum payments and stay updated on all bills. Major changes since your original mortgage was obtained could have an effect on the interest rate that you qualify for. Talk to your lender about emergency situations or any other reasons that affected your ability to pay in the past.

Loan Discount Points or loan origination fees: These are paid upfront to avoid having to pay higher interest rates. One point is equal to one percent of the total borrowed amount. Most borrowers allow lenders the option of deciding whether or not to pay for discount points, typically the more discount points you pay the lower your interest rate will be.

Appraisal Fees: Before refinancing your home, your lender needs an estimate of the value of your home. An appraiser is usually hired to come out and inspect your home, though your lender may use other methods to find your home's value.

Administration Fees: Both brokers and banks typically charge a fee for providing refinance loans to you. Banks set their own fees; brokers normally charge a fee of 1 to 1.5 percent of your loan amount. The bank usually pays this for the broker bringing your business to the bank.

Processing Fees: Someone had to take the time to arrange and gather all the loan documents needed for your home refinance and a fee will be needed to cover the cost.

Pre-payment Penalties: Penalties for paying your mortgage early may be part of your current mortgage agreement. If that is the case, the cost may be able to be covered with your refinancing loan or handled out of pocket by you.

These are only a few of the potential fees that you could be required to pay in refinance loan costs. Every mortgage lender is different. Other common fees include local taxes, notary services, attorney fees, inspection fees, mortgage insurance and escrow services. Some refinance loans are offered at no cost, though you may not pay anything up front, the lender typically rolls the cost over into your new home mortgage or they are recouped for a slightly higher interest rate. You may also choose to pay for the refinance loan costs through the use of investment, stocks or with money you've already saved up to keep monthly payments as low as possible.

Before deciding between no-cost and regular refinance loans find the difference between the monthly payments of the old loan and the refinanced loan, add in the fees to find the break even point. For example, your new loan offers you monthly savings of $150 and your loan fees add up to $3,000, in only 20 months you will have reached the break even point. If you plan to continue staying in your home for at least this long than there is no reason not to take advantage of refinancing loan options. Dinkytown offers a breakeven point refinance calculator that can help you find out how long it will take you to start saving money when you refinance your current home mortgage.

Loan refinance calculators can be used to help you determine refinance costs and how they impact your overall savings. Compare multiple refinance loan options to get the best deals. Ask lenders or brokers about all possible fees, as some fees are negotiable, but lenders won't volunteer that information. You will need to ask for the information.

When you refinance your home, your interest rate decreases, but you may pay more over time. For most homeowners, this is reasonable since it allows them to lower high monthly payments that they can't afford to make. If you have recently increased your annual salary consider refinancing your loan to shorten your loan term from 30 years to 15. Doing so would mean paying more per month but allow you to pay less in interest over the term of your loan and get rid of the debt much faster.

Home mortgage refinance loan costs don't have to be unreasonable. Write down all the fees associated with refinancing your loan; speaking to several lenders and comparing fees can save you thousands. You may even want to consider a mortgage broker in this situation, as mortgage brokers work with several lenders at once to get you the best possible quote on your mortgage refinance. Read your loan agreement and address any questions or concerns you have. Check with your current mortgage lender first, since you have already completed the mortgage process with them. Some fees may be avoided and save you several hundred dollars on the cost of refinancing the loan. If you are willing to investigate your refinance loan costs you will be able to save more money over time.

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Inside the Liar's Loan 2

How the mortgage industry nurtured deceit.

(Continued from Inside the Liar's Loan)

These were not "subprime" loans. The borrowers' average credit score was 705, well within prime territory. This is a fairly typical package of loans for a mortgage-backed security, but one thing that does make it stand out is the proportion of these loans that didn't ask for income documents: 88 percent.
Historically, a year into the life of a loan, well less than 1 percent of typical prime loans would be 30 days late or more. By the end of January, when Shedlock first looked at it, just eight months after the loans were made, almost one in five were at least 60 days overdue.

Shedlock looked at it again two months later at the end of March. The results:

• Eighteen percent of the loans are already in foreclosure—or have already been seized by Washington Mutual.
• One in four of this bundle of liar loans is already 60 days past due

Remember, these are folks with good credit histories—and one in four of them is well on his way to losing his home, or has already lost it.
Think about that city center again. All those cars speeding through those red lights. And crashing.
None of this could have happened without everyone's willing participation. If a car rental agency put up a huge sign saying, "We don't check your driver's license," you wouldn't imagine it really meant anything but "Come on in, we don't care if you have one." The word fraud really doesn't conjure up anything close to the real moral or financial reality.
Clearly, amazing degrees of stupidity and mendacity were involved. Some of the sob stories that have come out of the mortgage crisis, unhappy as they are, raise the question: "These folks earned $3,000 a month and had mortgage payments of $2,700. Was it so hard to see this was a mistake?"
But consider the position of borrowers in markets where close to half the people taking out mortgage loans were lying. Keep in mind that in some places (for instance, San Diego), half the people in the market were taking out stated income loans and so bidding up prices to points where almost any house became impossible to finance for someone who did not lie.
Then try to imagine the broker hovering over your shoulder, like the scientist in some mortgage-world version of the Milgram Experiment. In ordinary circumstances, the people and institutions you deal with reinforce social norms. They say it's not OK to lie. But what happens when the structures and institutions break down and start telling you the opposite?
In that case, the honor system that we take for granted goes out the door. You wind up with the situation in many countries—Russia, India, Italy—where, say, not paying taxes is not aberration; it's normal. What might be most worrisome is that once you get to that point, it's hard to get back. You don't just have to restore the structures. You need to restore the norms, too.

By Mark Gimein, http://www.slate.com