The most common homeowner mistake is overpaying closing costs for refinancing a mortgage. Did you know that lender and broker fees are negotiable and vary widely from one company to the next? Spend a little time comparison shopping and haggling with prospective brokers over fees and you can literally save yourself thousands of dollars when mortgage refinancing. Here are several tips for you refi to help you pay less closing costs for refinancing a mortgage loan.
Reasonable Closing Costs for Refinancing a Mortgage
How much can you reasonably expect to pay closing on your mortgage refi? What fees are necessary and which ones are simply garbage? The difference can make or break your mortgage refinance because you’ll have to recoup these out-of-pocket expenses before benefiting from your new home loan. The more you pay, including lender junk fees, the longer it’s going to break even on your closing costs.
How much should you pay? One area most of your neighbors overpay for their mortgage refinance is the loan origination fee. This is paid to the mortgage broker or company for arranging your new home loan. One percent for loan origination is perfectly reasonable; however, many brokers try to charge double, if not more for their services. Despite what they tell you there’s nothing magical about the work your mortgage broker does; if the person you’re working with isn’t willing to negotiate their fee simply move on to the next broker.
Beware Mortgage Lender Junk Fees
A dishonest mortgage broker/lender will try to boost their profits at your expense by including unnecessary fees in your closing costs for refinancing a mortgage. These junk fees include the application fee, processing fee, broker courier fee, and any refinance rate lock fee. If the broker you’re working with quotes you a fee for locking your interest rate this is a sure sign that you’re working with a dishonest person as no lender in the United States charges a fee for locking in their lowest refinance rates.
Good Faith Estimate vs. HUD-1 Settlement Statement
Should you trust the Good Faith Estimate (GFE) provided by your lender and what about that Annual Percentage Rate? When it comes to shopping for the best refinance rates the Good Faith Estimate and Annual Percentage Rate (APR) are less than worthless for comparing home loan offers. The problem with APR is that there is no standard for lenders to follow when calculating as to which fees they’re required to include in the calculation. The APR is based on an estimate given in “good faith” (get it, Good Faith Estimate) that has become little more than a marketing tool for lenders to sell overpriced home loans. When it comes to fees the last word is on your HUD-1 Settlement Statement, not on the GFE.
The Ultimate Guide to Paying Less For Your Next Home Loan
There is a method for shopping for the best mortgage quotes when refinancing that gets you today’s lowest refinance rates while avoiding junk fees and lender markup. Focus your energy on finding the right person to arrange your refi instead of comparing those Good Faith Estimates into the wee hours of the morning and you can save yourself thousands of dollars and hours of frustration.
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You can learn more about paying less for mortgage refinancing while avoiding unnecessary fees and other common mortgage mistakes by checking out my free Underground Mortgage Videos.
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My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
