If you want to refinance your mortgage, you’ll probably be surprised at the amount of closing costs you’ll have to pay again. You know you already paid closing costs when you bought the home, but now you’ll have to pay them all over again to refinance.
Luckily, there are some simple ways that you can get the lowest costs possible.
First, don’t assume you have to stick with your current lender. That’s what they want you to do. This way they can charge you whatever they see fit for your loan and not worry about you going elsewhere. But, if you shop around, you’ll know that there are other banks/lenders out there that will give you lower costs on your loan.
If you shop around, make your current lender the last stop. In other words, don’t let them know that you want to refinance until you have your other offers in hand. This way you can show your current lender the offers you’ve received. Some lenders will meet or even beat those offers in an effort to keep your business.
Negotiate Certain Fees
Any fees that pertain to the lender itself can be negotiated. For example, if the lender will charge you origination points, you can negotiate just how many points you pay. You can also negotiate discount points, processing fees, and application fees.
It helps if the lender knows that you are shopping around. If you happened to get a quote from another lender with lower closing costs, don’t be afraid to share that information with your lender. This may prompt them to negotiate with you and give you the lower fees that you desire.
Shop Around for the Services
There are certain third parties that have to get involved with your refinance. You’ll probably need an appraisal and you’ll definitely need title work done on the home. If your lender is open to it, consider shopping around for appraisers and/or title companies. Sometimes you can find better rates than the lender’s go-to resources.
Before you do this, make sure your lender will accept an appraisal and/or title work from companies other than those that they already deal with, because some will and some will not.
Ask for a No-Closing-Cost Loan
If you really don’t want to pay any closing costs, you can ask the lender to pay them for you. This no-closing-cost loan will leave you with little to no money required at the closing, but with a higher interest rate.
You’ll have to do the math to see if it’s worth taking the higher interest rate. Some lenders inflate the rate just a little bit, making it worthwhile to forgo the closing costs. Others increase the interest rate so much that it doesn’t make sense to skip paying the closing costs as it will cost way too much over the life of the loan to have the higher interest rate.
Whether or not this makes sense for you depends on how long you’ll be in the home. If you will stay there for the long term and you don’t want to refinance any longer, it’s not a good idea to take the higher interest rate. The interest over the life of the loan will cost much more than the original closing costs. If you’ll move soon or know that you’ll refinance again, though, it could be a good strategy.
With enough legwork and negotiations, you can get your closing costs down to where you want them to be. You’ll have to reside to the fact that you will have to pay closing costs at some point unless you opt for the no-closing –cost loan, but you can minimize exactly how much that you pay.
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