A Complete List Of Closing Costs For A Refinance Or A New Mortgage

A Complete List of Closing Costs For a Refinance or New Mortgage

The average home buyer incurs mortgage closing costs which are equal to 2% to 5% of the property price. The same costs for refinance are between 3% and 6% of the outstanding principal on the existing home loan. On average, the costs for both types of financial products are around $4,000 but this is a very general figure given that they are dependent on the property price. Take a closer look at each cost which you will incur when you refinance or take out a new home loan.

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Application Fee

This type of fee covers the initial processing of your loan application and the checking of your credit report. Most loan applicants pay an application fee around $350, but this is a median figure. You may actually end up paying over 5 times less.

Origination Fee

All lenders charge origination fees. They cover the lenders’ costs associated with evaluating and preparing the new mortgage or the refinance loan. These fees are typically calculated as a percentage of the loan principal. The percentage does not typically exceed 1.5%.

Discount Points

Many borrowers choose to buy discount points so that they can lower the interest amount which they will pay over the term of the new mortgage or the refi loan. This is not mandatory, however. The average borrower spends up to 3% of the loan principal on discount points.

Attorney Fees

These fees are incurred by the lender for the legal closing of the refinance or new mortgage deal. They are transferred to the borrower. Typically, they do not exceed $1,000. Sometimes, they are added to the origination fee.

Appraisal Fee

Lenders require property appraisal to ensure that the value of the house purchased is worth at least as much as the loan amount. The appraisal fees typically do not exceed $500.

Survey Fee

This fee is paid for verifying the lines of the property. It is paid only when a new mortgage is taken out. It is not included in the closing costs for refinancing.

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Inspection Fees

Most lenders require home inspection to ensure that the property is in good structural condition and that all systems like the plumbing and electrical one are working properly. You can expect to pay such fees as a first time home buyer and when you are refinancing a mortgage as well.

Title Search and Title Insurance Fees

The lender will perform a title search to confirm the legal ownership of the property and you have to pay for it. Title insurance covers the lender against errors in the search. The insurance fees are incurred by the borrower.

Escrow Deposit

Most lenders require an escrow deposit to ensure that property taxes and the private mortgage insurance fees for the first couple of months will be paid on time. You will have to put a set amount of money in the escrow account at the time of purchase of the property. The lender will use the funds to cover the costs mentioned above. Given the way in which the escrow deposit is used, it is not required for refinancing.

Recording Fee

This fee is paid for the recording of the documents for the new property ownership. It is fairly small so it should not add greatly to your budget.

Prepayment Penalty

This fee may be charged when an existing mortgage is paid off with a refinance loan. Only private lenders can charge this type of fee. Government-backed loans like the FHA loans and ones granted by government credit unions do not have such a fee. It is actually prohibited in many states. In any case, you must check whether you will owe such a fee when you refinance. It is typically the sum of the interest payments for up to six months.

Lenders are legally required to provide a good faith estimate of the home loan closing costs so you will have a general idea of how much you will owe. Just keep in mind that the actual costs may be up to 10% higher than the estimate.

Experts recommend that borrowers stay away from the so called no-cost mortgages and refinance. This is because the costs are typically added to the principal or the lender charges a higher interest rate. Any of these strategies makes the costs much higher even though their payment will be spread over a period of time.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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