Thursday, October 19, 2006

Will Refinancing Your Mortgage Save You Money?

There are transaction costs and fees involved in any refinancing that must be either paid out of pocket or added to the mortgage principal. Some of those costs can be considerable. Title insurance can easily run into four figures and broker fees can be expensive as well.

Like many things in life, timing is everything here. Is your job likely to relocate soon? Will you need a bigger house in the next couple of years? Unless you're planning to stay in the home for a while, the benefits of a lower monthly bill may not be worth the additional expenses that refinancing generates.

You need to find out how much refinancing costs. First, check to see if your present mortgage has any kind of prepayment penalty. Next, compare interest rates and loan types for at least three lending institutions. Find out what kinds of fees or closing costs are charged for a new mortgage. Fees for the appraisal, loan application, title search, title insurance, home inspection, and legal advice are common costs. Loan origination fees (also called points) are the largest closing cost you will pay. A point is usually one percent of the total loan. One point or one percent of a $90,000 loan would be $900.


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