Lower interest rates may be tempting, and as part of a sound financial plan you should consider whether it makes sense to refinance your current mortgage but don’t forget to factor in the costs of the new home loan in your calculations.
The costs of the new loan could negate potential savings, particularly if you intend to sell before your monthly savings can make up for the costs of refinancing a home–so it pays to estimate costs and shop carefully before proceeding.
Don’t be surprised if your new mortgage carries most of the same costs as your initial purchase mortgage–including an appraisal, processing fees, and other loan closing costs.
Some of these costs and fees may include:
- Appraisal fee
- Land survey fees
- Attorney’s fees
- Title search and insurance
- Points to lower rate
- Recording fees
Closing costs vary city to city but might be 2% to 5% percent of the home’s value. Often, homeowners can wrap their closing costs into the new mortgage, but doing so will increase the loan amount.