Refinancing your Home: Know More about Different Closing Costs

Are you looking forward to refinance your home? With the rate of interest being relative low, homeowners can refinance their house to decrease their monthly payment. However there are a large number of closing costs associated with the refinancing option. So in order to keep these costs to the minimum, it is important to have good knowledge about various associated costs. Some of the most common costs that are required to be paid by the borrowers are:

Escrow and title fees

When a person purchases a house, he is required to pay title insurance in full. However when he opts for a refinance, he would definitely need a new policy. As a home owner, you can talk to your lender who can in turn lower the fee. When it comes to escrow, a home owner can reduce the cost by paying the property tax himself along with paying large sum of money as the down payment.

Appraisal fees

Lenders often use a professional and knowledgeable appraiser to evaluate the real worth of the house but the appraisal fee is paid by the home owner. Therefore this hidden cost can be decreased by talking to the lender. As a homeowner, you should ask for the payment receipt for the payment made to the appraiser to know about the actual payment done to the professional.

Credit fees

Lenders in large number often ask for a residential mortgage credit report. As compared to the tri-merged credit report, a residential mortgage credit report is expensive and more reliable. This can thus emerged as an additional cost that is required to be paid by the home owner. But the best way to reduce this cost is to ask for the receipt in order to verify the actual cost.

Insurance fees

You as well as the lender would definitely like to get your home insured against any disaster. Depending on the location of the house, the insurance policy may vary and thus the insurance cost can increase or decrease accordingly. The insurance can be availed for a year or for some months. So before you opt for an insurance, shop around different companies and ask questions. Sometimes the lender can help you to avail the best insurance that suits your needs as well as your budget.

Lending fees

Lending fees generally include processing, funding, underwriting, administrating and document preparation fees that have been lumped together. The borrower is required to pay this fee, services of which are done by the lender. You can talk to your lender to get these fee reduced or waived off completely.

Another popular fee is the mortgage broker fee. A borrower is required to pay this fee if he plans to hire a broker. In other words, it is also known as the commission of the broker which usually falls between 1-5% of the total loan amount. So when you plan to refinance your loan, try to close it at the month’s end as it can help you save on your money. Also do not forget to shop around to know more about the closing costs and other costs associated with refinancing.

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