Refinance rates refer to fees involved with refinancing mortgages. Common fees include: loan origination application fees, document preparation, title, appraisal, and processing fees, tax and underwriting service, fees to obtain credit reports, and settlement fees.
In order to obtain the best refinance rates homeowners should conduct online research to compare lenders and mortgage refi options. Spending a few hours comparing mortgage lenders can result in saving hundreds of dollars each year. Considering the average term of mortgage notes is 30 years, homeowners can potentially save thousands of dollars in the long run.
Overall, borrowers can be subjected to dozens of mortgage refinance fees. Many are nickel and dime expenses that when combined, can add thousands to the cost of refinancing. Therefore, it is important for borrowers to carefully review which refinance rates each lender charges prior to entering into a mortgage refinance contract.
Mortgage lenders are required to provide borrowers with a "Good Faith Estimate" of anticipated refinancing costs. This estimate only includes refinance rates charged by the lender and does not reflect costs of third party service providers such as property appraisers, home inspectors and real estate attorneys. Once borrowers begin the process to refinance mortgages, additional services may be required.
Chances are refinance rates will be higher than costs provided in the good faith estimate, so borrowers should anticipate additional fees. When comparing each lenders refinance rates it is important to compare costs of services instead of looking at the total cost. One lender might charge $500 for originating the refinanced mortgage, while another lender might charge $750.
Nearly every lender charges an mortgage refinance loan application fee. Since borrowers are taking out a new loan they must undergo the same financial scrutiny as they did when taking out their first home mortgage loan. Application fees are charged to cover the cost of processing the mortgage loan application and obtaining a copy of current credit reports. Loan application fees can range between $50 and $400.
Most mortgage providers charge a loan origination fee to evaluate and prepare loan documents. This mortgage refinancing fee can range between 0- and 1-1/2-percent of the loan principal. Loan origination fees on a $100,000 mortgage could be as much as $1500.
Lenders often charged points when refinancing mortgages. Each point equals 1-percent of the mortgage loan. Two types of points can be assessed against home loans. Loan discount points can be paid to reduce the rate of interest. The second type of home loan points is charged to earn money on the loan. Borrowers can negotiate the number and type of points charged to refinance home loans. Refinance rates can range between 0- and 3-percent of the loan principal.
Appraisal fees can be assessed to determine the property's current market value. These fees can be included in the application fee or charged separately. Fees typically range between $300 and $700.
Inspection fees are commonly charged when borrowers enter into mortgage refinance. Home inspections are required to analyze the structural condition of the property as well as to test the septic system or water supply. Refinance rates for home inspections can range between $150 and $400.
Borrowers who obtain loans insured by federal programs may incur additional fees when financing more than 80-percent of the property value. Federal Housing Administration (FHA) refinance rates hover around 1-1/2 percent, plus 1/2 percent per year. Veterans Administration (VA) loans can incur refinance rates between 1-1/4- to 2-percent. Private mortgage insurance (PMI) fees range between 1/2- to 1-1/2- percent of the principal amount.
Mortgage lenders generally assess attorney review fees which are paid to real estate lawyers that conduct the closing. The average cost of attorney settlement costs is $500 to $1000.
Prepayment penalties can be assessed for paying off the existing mortgage. Home loans obtained through credit unions and the federal government cannot include mortgage prepayment penalties. If they are included the cost can range from one to six months of interest payments.
Other refinance rates can include fees for tax service, flood certification, flood monitoring, title search and title insurance, and survey fee.
As you can see, refinance rates can quickly add up. Before submitting a home loan refinance application, take time to do your homework by comparing lenders and asking plenty of questions. Also, visit the Federal Reserve Board website and review the Consumer's Guide to Mortgage Refinancing at FederalReserve.gov.
Last, but not least, peruse our mortgage refinance article library where we present a vast array of information and resources to help you make informed decisions.