Mortgage Refinancing Cost Facts
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Why Mortgage Refinancing Cost Is Nothing to Worry About
You are thinking of mortgage refinancing because you want to make some improvements on your property. But you are hesitant because you don’t know how much the mortgage refinancing cost will take. And, you don’t know how much this would cost you out of pocket. The truth is, the cost of refinancing comes from mortgage penalties and legal fees. They’re all rolled into the new loan, it’s not a cost you pay out of pocket. The only cost you pay out of pocket at the time of mortgage refinance is the cost of the appraisal, which most mortgage companies are going to charge you somewhere around $350 – 500.
Now, the rest of the cost associated with refinancing are also going to be rolled into the new loan. Most mortgage companies are going to charge you for the mortgage penalties– those totaling in the neighborhood of couple thousands to $15,000, depending on a lender, that why we don’t recommend dealing with certain lenders and big banks.
Also you’re going to pay for closing fees, which are legal fees along with the lender’s title insurance, for a total of about $1,000. So, if you take the mortgage penalties, the legal fees, and the cost of the appraisal, you can estimate the cost of refinance. That makes the conversation about whether or not it is worthwhile easier. If you’re looking at a $400,000 loan, the interest rate will be lower by half a percentage point that’s going to save you $2,000 a year in interest. If it costs you $3,000 to save $2,000 a year, and you expect to stay in your home for any length of time, your refinance makes sense.
In 5 years, you’ll have saved about $10,000 in interest. When you do the refinance, you’re going to notice the setup of your escrow account being included in there; those are called & prepaid. But just as you did when you purchase your home, you set up escrow accounts to pay your taxes and your insurance. And so these things need to be prepaid. What happens when you get a new loan is you pay off your old loan, which has your current escrow account. Your current escrow account will be used to pay your taxes and insurance. You’ll get a refund check from the old company within 30 days of those escrows and that account.
But when you set up your new loan, you’re going to have to pre-pay into those accounts to get that started. You’ll also notice that it’s being rolled into the loan. If you’re somebody who’s sensitive about not wanting your principal to increase, you simply take the refund from the old mortgage company you get within 30 days, and then apply it as a principal into a new loan and you’ll pay that back.
There’s really not much to worry about the mortgage refinancing cost because what you’re actually paying is the cost of the appraisal. All the other fees are rolled into the new loan, which makes mortgage refinancing well-worth it. Contact us today to find out more about mortgage refinancing cost.
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