Closing Costs? What are They?
If you have ever bought a home, you may have had a shock when you saw the total of the closing costs. Nevertheless, buyers who have been through this are sometimes tempted to re-finance their mortgage at a lower rate, not considering how much the closing costs will add to the re-financing.
Banks, of course, incur expenses to process and close a loan. Needless to say, the bank will not normally absorb these costs, but rather pass them on to the borrowers. (Although, in competitive loan markets, banks have used lower closing costs as a factor to attract new borrowers, by absorbing part of the fees.)
or inspections -Title search -Credit report
There may be taxes and additional fees by the government as well.
If you are concerned about these expenses, you may be able to control some of them to a certain extent. Many times banks may make special offers to entice borrowers to take a loan with them.
Make sure you receive a good faith estimate of the closing costs, since this is required by law. This gives you the opportunity to look at each of the charges and see if any of them can be reduced.
If you do find that any of the costs are not in line with standard 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 you are familiar with how much your closing costs are going to cost, and you have made some efforts in reducing them, you can calculate if refinancing is really going to be worth it by using an online mortgage calculator to find out the costs remaining on your present loan.
This is not too complicated, since you just have to enter the numbers for your present loan, and the new loan you are considering, adding the closing costs, of course.
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Posted on September 9, 2009
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