Mortgage Borrowers Beware

Mortgage Borrowers Beware of Extra Fees When Refinancing Your Home

Refinancing a home loan can be a smart financial move. It may lower your monthly payments, help you pay off debt faster, or give you access to equity for major expenses. Mortgage Borrowers Beware, many homeowners overlook one critical factor: extra fees. These hidden costs can add up quickly and sometimes outweigh the benefits of refinancing.

Common Fees to Watch Out For

1. Application Fees
   Lenders often charge a non-refundable application fee to start the refinancing process. This can range from $75 to $500.

2. Origination Fees
   Many lenders take a percentage of your new loan as an origination fee, often 0.5% to 1.5% of the total loan amount. On a $300,000 mortgage, that could be $1,500 to $4,500.

3. Appraisal Costs
   A new appraisal is usually required to confirm your home’s current market value. Expect to pay $300 to $700depending on location and property size.

4. Title Search and Insurance
   Refinancing requires another title search and possibly new title insurance, which can run $400 to $1,000.

5. Credit Report Fees
   Lenders typically charge a small fee ($25–$50) for pulling your credit report.

6. Prepayment Penalties
   Some existing mortgages include a penalty if you pay off the loan early—something that refinancing would trigger.

7. Closing Costs
   Just like your original mortgage, refinancing includes closing costs. In total, fees usually equal 2% to 6% of your loan balance.

When Refinancing Makes Sense – Mortgage Borrowers Beware

Even with fees, refinancing can be worthwhile if:

• You’re lowering your interest rate by at least 1% or more.

• You plan to stay in your home long enough to recoup costs (calculate your “break-even” point).

• You want to switch from an adjustable-rate to a fixed-rate mortgage.

• You’re consolidating high-interest debt into a lower-interest home loan.

Tips for Borrowers – Mortgage Borrowers Beware

• Shop Around: Compare offers from multiple lenders to find the lowest fees.

• Ask for a Loan Estimate: Lenders are required to give you a detailed estimate of costs.

• Negotiate Fees: Some charges, like origination and application fees, may be reduced or waived.

• Watch for “No-Closing-Cost” Refinancing: These loans often roll fees into the balance, so you’ll pay more over time.

• Do the Math: Use a refinance calculator to see if the savings outweigh the fees.

Our Take

Refinancing can save you money, but only if you understand the true costs. Mortgage borrowers should be wary of extra fees that may erode the benefits of a lower interest rate. Do your homework, ask the right questions, and make sure refinancing is truly the right move for your financial situation.