Right now, mortgage interest rates are near all-time lows; however, the cost of refinancing a mortgage has actually slightly increased. Closing costs, administrative fees, and other expenses can easily negate a homeowner’s potential savings through getting a lower interest rate. Here are some expensive things often associated with refinancing a mortgage that can be avoided and save you money.

-Home Appraisal Fees
Many mortgage lenders and banks require a recent home appraisal. This is especially needed due to the struggling housing market and dramatic decrease in home and property values across the country. Even if the home appraisal is less than favorable, or totally opposite of what you think the home is worth, the fee for this service still needs to be paid. This appraisal can cost up to $500, or even more and needs to be paid by the homeowner. This is often unavoidable and needs to be paid up front. While $500 may not seem like much in the grand scheme of things, many people do not realize that it is due and often have problems coming up with the money on a short notice.

-Private Mortgage Insurance
Mortgage insurance is often required when you do not have 80% or more equity in your home. That means that most people refinancing will need to pay this in some form. The cost of this insurance is based on the “risk” the mortgage lender or bank is taking on you. This means that homeowners with bad credit, upside down mortgages or other financial hardships will need to pay more. This private mortgage insurance can cost up to $1500 each year the loan exists for homeowners with a typical mortgage and a sub 700 FICO score.

-Application or Administrative Fees
This type of fee is the one that has been increased the most by mortgage lenders and banks. Sometimes, in order for a mortgage lender or bank to be able to offer a lower rate than a competitor, they make up the difference by inflating these costs. Typically, these fees run around $700, and that is due prior to you getting a mortgage refinancing. These fees are associated with every mortgage refinancing option that exists, whether it is clearly stated or not. However, the amount of these costs varies drastically at each lender or bank. Compare the different application fees and pick the cheapest one in order to save some money.

Even though mortgage refinancing can be a great thing for many people, these fees and costs often take some, or all, of the benefits away. Make sure you are prepared and fully aware of any extra or excessive costs or fees when choosing a mortgage lender or bank to refinance with.

-M Petrone

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