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Tips to reduce hidden expenses that come with refinancing

On Behalf of | Sep 10, 2020 | Residential Real Estate |

Mortgage refinance options can result in better deal for the homeowner. Although the terms of the refinance are appealing, homeowners are wise to consider the cost that can accompany the transaction.

What expenses accompany a refinance?

Banks that offer refinancing for a mortgage often require a closing. Homeowners likely remember going through closing when they initially purchased their home. In many cases, sellers covered these expenses during the initial purchase. However, when refinancing, the financial institution offering the funds may require the homeowner cover the expenses that accompany the transaction.

The details of closing costs vary depending on the financial institution and the details of the refinance agreement. Common factors that impact the amount include property taxes in the area, the application fee and an underwriting fee. Overall, the cost often ranges from 2% to 6% of the borrowed amount.

Can a homeowner avoid these fees?

One way to handle the fees that come with this transaction is to get a mortgage that does not come with closing costs. It is important to note that the fees that come with initiating the mortgage are still present. The difference is the fees are rolled into the refinancing. As a result, the homeowner pays for the fees as part of the loan.

It is also important to know that interest rates fluctuate. A homeowner can further take advantage of a good refinancing option by watching these rates and moving forward with the agreement when the rates are low.

The terms of a refinancing agreement are not set in stone. Homeowners are allowed to negotiate these deals. Strong negotiation can result in an even better refinancing arrangement.