Understand Closing Costs

One of the surprise expenses for most first house buyers is the total closing costs. Frequently, people may be tempted to re-negotiate their older, higher rate mortgage when rates come down. It is important to consider this carefully and make sure any savings you have are not eaten up by the closing costs on the loan.

When a bank establishes a mortgage, there are expenses to do so. In general, many of these expenses are not determined by the bank, but are fees they are charged and pass onto the borrower. There are some fees over which the bank has control, and if they are aggressively seeking new loans, they may reduce or eliminate them.

The following is a list of closing costs: -Application fee -Origination fees (or points) -Attorney fees -Transfer taxes -Recording fees- -Appraisal -Surveys and

additionally, there may be taxes payable.

As a prospective re-financer, you may want to know which of these fees can be reduced, or even eliminated, such as their application fee, and which are not under the bank's control. Lawyers' fees, for example, are not usually subject to debate, and the appraisal fee is set by an outside firm that does the appraisals.

Be sure you receive a good faith estimate of the closing costs, since this is required by law. Be careful that your lender has not offered you a great loan rate, but then padded the closing costs to such an extent that they recover the difference.

If you do find that any of the costs are not in line with market rates (you can call another bank and ask them what their fees are-this will apply in some areas, such as an appraisal or a credit search, or you can file another application and get another good faith estimate), call them on it and request to negotiate the item.

Now that you know how much you have to pay, you have to make sure it is worthwhile to re-negotiate your current mortgage. You can obtain a mortgage calculator on many sites on the net, and it will tell you how much the loan is going to cost over its life.

To the total cost of the new loan, make sure you add the closing costs, since you will not have them if you stay with your present mortgage. Now you can decide if it is worth re-financing your home.
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