When you refinance your mortgage loan you will be required to pay closing costs; this expense is the fees you pay to finalize your mortgage loan. Before choosing a mortgage you should examine the closing costs found on the Good Faith Estimate provided by your mortgage lender. It is important to use the closing costs as part of the comparison you make prior to choosing a lender. Many homeowners overlook closing costs and wind up overpaying for their new mortgage because of it.
Some Lenders Will Finance Closing Costs
Your lender may allow you to finance the closing costs. The advantage of this is you will not be required to have cash on hand at closing. Your closing costs and any additional lender fees are simply tacked onto your loan balance. Remember that if you finance the closing costs you will pay interest on that higher amount; the closing costs you finance will end up costing you a lot more than if you had paid cash at the closing table.
When you review your final paperwork make sure the lender has included a tax adjustment. Tax adjustments are often left out by the lender and can save you hundreds of dollars. Before you sign the loan contract it is important to understand what you are paying in closing costs and who the fee is being paid to. This is especially important if you used a mortgage broker to find the loan; if you do not understand where your broker’s fee is paid you could be in for a costly surprise when you close on your new mortgage. You can learn more about finding the right mortgage for your financial situation without overpaying for it by registering for our free mortgage guidebook: “Five Things You Need to Know before Refinancing Your Mortgage.”