If your eyes start to glaze over when you think about the expense involved in refinancing your current mortgage, then you could benefit from these tips for keeping your mortgage refi closing costs low.
Dig into the closing costs line by line with your loan officer. As required by law, refinancing home owners are quoted a mortgage interest rate and then receive a Good Faith Estimate of closing costs. Unfortunately, most borrowers only look at the bottom line and do not ask questions about specific charges. If you’re unsure about a specific cost, have your loan officer explain it to you.
Choose your rate and point option carefully. The largest individual closing cost item is the point (or points) you pay to secure your mortgage rate. Making the choice that is best for you will make the biggest impact on your overall closing costs. Generally, if you plan to keep your home and your loan for at least seven years, then refinancing into a lower rate loan with two points will end up saving more than choosing a zero point loan at a higher rate.
Ask for a discount. The mortgage market is extremely competitive right now, and most lenders will not want to lose a qualified client over a small sum. Very often, the simple act of asking for a discount off of closing costs will result in a credit from your lender of perhaps a few hundred dollars. The larger your loan amount, the larger the discount that your lender will likely give you.
Get your title insurance discount. When you initially purchased your home, you paid for a brand new title insurance policy which is required for your loan. When you refinance, you can get a discount of about 40% off the cost of a new title insurance policy. Most lenders will help you get this discount, but be sure you double-check that it is being applied.
Know and understand the regulations. Federal regulations now require borrowers to receive an estimate of closing costs, and the lender cannot collect any type of application or appraisal fee until three days after the receipt of the costs. In addition, if there are any changes to the costs before closing, you have additional time to review and accept the changes.