Five Tips to Keep Your Mortgage Refinancing Closing Costs Low

Learn the Five most important tips to keep your closing costs low when you refinance your mortgage

Home owners looking to lower their mortgage payments through refinancing can be hesitant because of high closing costs.

If your eyes start to glaze over when you think about the closing costs involved in refinancing your mortgage, then you could benefit from these five simple tips for keeping your mortgage refinancing closing costs low.

1. Do not be afraid to dig into the closing costs line by line with your loan officer. Many refinancing home owners are quoted a mortgage interest rate and then receive a Good Faith Estimate of Closing Costs as required by the federal government. Unfortunately, most borrowers only look at the bottom line and do not ask questions about specific charges.
2. Choose Your Rate and Point Option Carefully. The largest individual closing cost item is the point or points that you pay to get your mortgage rate. Making the choice that is best for your needs will make the biggest impact on your overall closing costs. Generally, if you plan to keep your home and your loan for at least seven years, then refinancing into a lower rate loan with two points will end up saving more than choosing a zero point loan at a higher rate.
3. Ask for Discounts. Very often, the simple act of asking for a discount off of closing costs will result in a credit from your lender of at least a few hundred dollars. The mortgage market is extremely competitive and most lenders will not want to lose a client over a small sum. The larger your loan amount, the larger the discount that your lender will likely give you.
4. Get Your Title Insurance Discount. When you purchased your home, you paid for a brand new title insurance policy which is required for your loan. When you refinance, you can get a discount of about 40% off the cost of a new policy. While most lenders will help you get this discount, you need to ask for it to make sure you are getting it.
5. Get it all in Writing. New federal regulations require that borrowers be given an estimate of closing costs and that the lender cannot collect any type of application or appraisal fee until three days have elapsed. In addition, if there are any changes at all to the closing costs before closing, borrowers have additional time to review and accept the changes. Despite the new regulations, it always pays to get all closing costs in writing and ask the lender to commit to keeping those costs the same.

Mortgage Closing Costs and Interest Adjustments

Some items that you see on your estimate of closing costs are not really costs but adjustments to transition from the old loan to your new mortgage. For example, many people think that by closing their loan at the end of the month that their refinance will cost them less because their interest adjustment will be lower. But what they are forgetting is that the lower their interest adjustment is on their new loan, the higher the daily interest add-on will be on their old loan.

Mortgage Refinancing Closing Costs: The positive side

Adjustments for escrows for taxes and insurance look like they cost a lot because you need to set up your new escrow account with the new lender at closing and you do not get your old escrow account back until a few weeks after your closing. For example, if you see on your closing statement that you need about $3,000 for property tax and insurance escrows, you will probably have about that much in your existing escrow and you will get it back once your old loan has been paid off. So in reality your escrow adjustments did not cost you anything extra.

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