What is the cost of refinancing your mortgage

What is the cost of refinancing your mortgage?

It is good to calculate the cost before doing something you might later regret. This applies to mortgage modifications, trips to Siberia where you find you don’t have enough for the return ticket or holidays in Paris when you didn’t know a bottle of water cost $10. However calculating the real cost of financial products like loan modifications can be difficult when advertisers are doing the best to attract your business without giving you the important details, how much is it going to cost. This article has the somewhat ambitious goal of clarifying the real cost of refinancing your mortgage or modifying your loan.

The bottom line.

The bottom line is that refinancing your mortgage or modifying your home loan is likely to cost you something between 3 to 6 per cent of your outstanding mortgage in fees. The exact costs vary from state to state and country to country so you will need to do some extra homework to find out the exact costs in your neck of the woods.

Application fee.

This fee gets the wheels of your loan modification spinning. It is the fee banks and lenders charge to get started on your case, ask for credit reports and print the paperwork. The fee can vary from $75 to $300 depending on the bank or lender.
There are also companies that offer to take care of all the paperwork involved in applying for a loan modification, they also charge a fee. These companies can be helpful and successful but there is really no reason why you can’t look after your own loan modification and it will be cheaper.

Loan origination fee.

This is a fee the lender charges to analyze and prepare your mortgage. Yep, I know, very similar to the application fee. This one can be pricey or free depending on the borrower, it ranges from nothing to 1.5% of the pending mortgage.

Points.

A point is an percentage of the outstanding debt, professionals and lenders charge points to reduce the interest of the loan and for other services. How many points are charged is negotiable with your lender.

Appraisal and inspection fee.

Your lender might ask for a new appraisal of the house to make sure it is still a suitable security for the loan. A termite and other bugs inspection may also be required for the same reason. Plan $475 to $1,000 for both.

Attorney fees.

Lenders will generally charge the borrower for the closing of the modification by a lawyer. The price will vary from $500 to $1,000.
Getting dizzy? We’re just getting started you have the new insurances that go with the mortgage, the title search to make sure the house is yours, a final survey of the house’s location and of course let us not forget the prepayment penalty that can range from nothing to 6 month interest payments.

By this moment you are probably thinking that it is simply not worth getting a loan modification, mostly you would be wrong. To find out the savings of a loan modification please read my next blog.