7 Cost Items To Keep Low When Refinancing Your Home

By on September 16, 2017

Interest rates are at their lowest points that we will ever see in our lifetimes.

If this is not reason enough to pull the trigger on refinancing you home, I don’t know what is.

Can you believe it that many home owners can slash more than half the interest they are currently paying on their mortgages by simply by refinancing now?

It sometimes beggars belief when property owners negotiate hard for an additional half a percentage point reduction when initially signing up for a loan… and refuse to take action when they could be saving as much as 3% to refinance.

Just like a new loan that goes with a new property purchase, refinancing will incur closing costs that will shock you like a taser gun.

So other than the obvious interest rates that you attempt to keep low, keeping closing costs in check will just make the remortgage experience just that little bit more pleasant.

Here are 7 costs items you can try the hardball approach on.

  1. Escrow and title
  2. Credit
  3. Points
  4. Mortgage broker commissions
  5. Processing fees
  6. Appraisal
  7. Insurance premium

If you are inexperienced at this, you might think that these costs are those that are necessary and that everybody has to incur them.

But that is not always the case.

And while some items are necessary, paying for them does not necessarily have to come from your own pocket.

1) Escrow and title fees

When your refinance your mortgage, you need a new title insurance policy.

The good thing is that lenders spend the most money acquiring new clients rather than retain them.

Because of this freaky behavior, often times they will move mountains just to acquire you as a new customer.

Ask for a good rate. Or if they refuse, ask for a better interest rate if you take up the insurance via their channels.

It is common for lenders to give preferential interest rates when clients sign up for the add-ons and upsells with them. Take advantage of that.

You can probably decrease the costs of escrow if you make a considerable down payment and chooses to pay the property tax yourself.

Escrow is an account you open to pay property taxes via a portion of your mortgage payments.

This means that if you decides to pay these taxes yourself, you do not open an escrow account.

2) Credit fees

This is something that a lot of people find ridiculous.

You are paying for your credit report which a lender require so as to assess your applications.

It is like buying a meal in a restaurant and then being asked to pay for the utility bills.

But in a restaurant, if you make enough noise like an adolescence, sooner or later the manager will walk over and speak to you himself to offer a 10% discount.

You definitely need your credit report if you want to be approved for a mortgage.

Some types of reports are more expensive than others. If you are unable to get the lender to absorb the fees, at least ask for a proper to verify the costs.

3) Points

Points are essentially discounts that are given a more fancy name. Just like fish eggs are named caviar to sound sophisticated.

When you buy a point, you are buying a discount coupon on the interest rate.

It is most useful if you intend to hold onto the same mortgage over the long term.

A discount will have a lesser material impact in the short term.

Although current rates are very low, there are still lenders that are charging an arm and a leg. People still take up these loans because of added value or for a peace of mind with more established lenders.

So if you do choose to go with one of these premium lenders, you can get them to give you better terms by buying up points.

4) Mortgage broker commissions

If you hire a mortgage broker, you will have to pay commission.

Brokers will have you believe that their high commission rates are standard in the industry. And you will be a fool to believe that.

This is a number that is definitely negotiable.

In many cities, brokers are remunerated by the banks and lenders. This means that they get a double whammy of commissions from the lender and from you.

If your loan is of a considerable size, they might be more willing than you expect to discount their commissions or even waive it. If you do not ask, you do not get.

5) Processing fees

The service industry is such a great business.

You can be charged just for someone to spend a few minutes attending to you.

Administrative fees you can expect to pay for refinancing include those for processing, underwriting, funding, documentation, etc.

This is another category of fees that a lot of consumers find ridiculous.

It is like buying a car and paying an additional 10% to make sure it is delivered without dents.

But the market practice is this way and there is no way you as individual can change it.

What you can do is question them and ask for discount and waivers. If a lender wants your business bad enough they can easily compromise on these charges.

6) Appraisal

To find out the market value of your property, lenders have to get professionals to appraise it.

It is unavoidable. But a lot of lenders do subsidize these appraisal fees or fully eat them up if you are lending a big amount. It does not hurt to ask for a receipt if you are paying for it.

7) Insurance premium

Lenders will be more than happy to see you insure your home.

You protect your interest and they protect theirs as well.

The risks gets transferred to the insurers and you are the one paying for it. And from partnerships with insurers, lenders might be making a huge commission from you as well if you sign up for these insurances via their marketing channels.

If you do choose this route, remember to ask for better terms or interest rates.

They are more likely to be flexible on this when you are buying through them.

You might even enjoy a special promotion from the insurer for their partnership with the lender. The thing is insurance has countless upsells. So be careful from signing for things that you do not need.



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