Typical Refinance Charges

Mortgage rates have recently fallen to near record lows, prompting many fiscally-strapped homeowners to consider refinancing. And while refinancing to pay a lower interest rate on your mortgage may seem like a brilliant way to save money on a monthly basis, the actual amount of money saved may not be as high as it seems because of the fees and charges associated with the refinancing process. Although refinancing fees vary by state and lender there are some average cost ranges that you are likely to encounter during the refinancing process. Before you sign on the dotted line make sure that you're fully familiar with typical refinance charges and hidden costs that may be required during your specific refinancing.

Prepayment Penalties

Many mortgages carry prepayment penalties, or fees that lenders demand if the borrower wishes to pay off his mortgage early. If you're refinancing with the same financial institution, you may be able to request a reduction of this penalty, or, if you're lucky, get it cancelled entirely. If you're switching to a new lender, however, you'll likely be stuck paying the prepayment penalty agreed upon when you signed your original loan documents. The prepayment penalty is often one of the ways that a borrower can unintentionally lose money on a refinancing transaction. Talk to a real person! 800-960-2850. Get answers now.

It is worth noting that if you're planning on refinancing, you may want to ask about the prepayment penalties attached to your new loan. After all, if you may want to refinance again at some point, or to sell your home and buy a new one, you'll need to refinance, and you won't want to be burdened or surprised by this steep penalty twice.

Smaller Refinancing Fees That Add Up

In addition to the hefty prepayment penalty that you may face, there are several smaller fees throughout the refinancing process, which may seem reasonable on their own, but can really add up to a significant chunk of change. For starters, the application fee is a charge that covers the cost of running your credit report and processing your loan request. Like most college application fees, mortgage application fees range in price, from about $75 to over $300. You won't want to overlook a mortgage with a good interest rate because of its steep application fee, but it is something you should keep an eye on.

The loan origination fee is another typical refinancing charge, which is basically a fancy way of saying that you're paying the lender (or, in some cases, the mortgage broker), to prepare your loan appropriately. While some lenders are generous enough to forego the loan origination fee, many financial institutions charge up to 1.5% of the loan principal for this service.

When refinancing your mortgage, you'll also need to pay to get your home appraised, even if you had it appraised when you applied for your first mortgage. The cost for the appraisal depends on which bank you use and where you live. Standard appraisal costs run anywhere from $300 to $700. Some lenders may require an inspection in addition to the appraisal, to check for problems such as termites, water damage or other structural damage that can occur over time. The cost for this may be from $200-$400.

The dreaded closing costs should also be considered when calculating the benefits of refinancing, as these typical refinance charges can be anywhere from a few hundred dollars to over $1000, and closing costs are seldom negotiable.

No-Cost Refinancing

Let's face it - there's no way that you'll be able to get all of the above fees canceled, waived or even negotiated down. The concept of a no-cost refinancing, however, allows you to roll the typical refinance charges into the cost of the mortgage, so that you pay the refinancing fees over time, instead of up front. Another option is to speak to your lender about rolling the refinancing fees into the principal, so that essentially you're borrowing a larger sum of money (upon which, of course, you'll need to pay interest).

No matter what type of loan you take, refinancing charges are inevitable, so make sure that you take these fees into consideration while calculating the benefits of refinancing your existing mortgage.

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