Mortgages: The Costs of Refinancing Your Mortgage

Refinancing your mortgage may be advantageous if your new loan is 2% lower than the interest on your current mortgage. However, there are additional charges and costs that you will encounter when refinancing.

Application Fee: Your lender imposes this charge in order to cover the initial costs of processing the loan and checking your credit report.

Title Search: This is charged for the cost of examining the public record to verify ownership of the real estate.

Title Insurance: This covers insurance policy costs to insure possible loss due to discrepancies in the title to the property.

Lender’s Attorney Review Fees: This covers the fees paid to the attorney or company that conducts the closing for the lender. You may also need to pay for other legal services relating to your loan which are provided to the lender. Furthermore, you should consider retaining legal counsel to represent you at all stages of the transaction and final settlement.

Loan Origination Fees: These are charged for the lender’s work in evaluating and preparing your loan.

Points: These are finance charges that are imposed to increase the lender’s yield beyond the stated interest rate on the mortgage note. They are usually prepaid at closing, though it is possible for the points to be added on to the cost of the loan. One point is equivalent to one percent of the loan amount. For example, one point on a loan of $100,000 would be $1000.

Appraisal Fee: This is for an appraisal which is a supportable opinion on the value of the property.

Prepayment Penalty: This penalty is imposed on your current mortgage for early pay-off of the existing loan.

Other Costs: These could include survey costs, hazard insurance, mortgage insurance, and home inspection fees.

To save on some of these costs, check with your lender who holds your current mortgage. The lender may be willing to waive some of these fees, particularly if the work relating to the mortgage is still current, such as fees for title search, surveys, and inspections.