Because of declining home mortgage rates, many people are eager to
refinance their existing home loan and take advantage of a lower payment or
a fixed rate. In fact, homeowners with bad credit may also benefit and
obtain comparable low rates. Although refinancing is very common,
homeowners must be prepared to pay closing costs and other fees.
Fortunately, there are ways the financially strapped can save money on a
refinancing.
Understanding Refinancing Costs and Fees
Applying for a refinancing is similar to obtaining your initial
mortgage. A refinancing creates a new mortgage. Thus, homebuyers are obligated
to pay certain costs and fees at closing. Typical fees include broker
fees, appraisal, title search, inspections, etc.
For the most part, these fees are paid at closing. If purchasing a new
home, the buyer may negotiate and have the seller pay the closing fees.
However, if you are the original owner, you may have to employ
effective techniques to reduce your closing costs.
Tips to Reduce Refinancing Closing Cost
When refinancing your home, it may be wise to apply for a new home loan
with your existing lender. In some instances, the lender may be willing
to waive some fees. If a good credit history has been established, the
lender will want to keep you as a customer. Hence, you have negotiation
power.
Because of low mortgage rates, homeowners may also take advantage of
“no or low closing cost” refinancing. With this option, the lender agrees
to waive the application fee. Moreover, these lenders will pay the
appraisal and title fee for the homeowner.
The downside is that these loans entail a slightly higher interest
rate. Nonetheless, “no or low closing cost” loans are beneficial. Because
these loans consist of a higher interest rate, this option is more
practical for homeowners who plan on moving within three years.
Another common approach for homeowners refinancing involves including
all closing fees into the home loan. This will increase the final loan
amount. While this approach will not necessarily reduce closing costs,
homeowners are not obligated to pay for their closing fees
out-of-pocket. This method is perfect for homeowners with little available cash.
View our recommended
Bad Credit Mortgage Refinance lenders or view all of our Recommended Refinance Lenders.
