When you’re considering refinancing your mortgage, you may be wondering whether you can negotiate closing costs on a refinance, and if so, how to lower closing costs when refinancing.
Here’s a closer look at it.
What to Know About Closing Costs
Refinancing your mortgage offers benefits such as lower interest rates, shorter terms, or extra funds from your home’s equity. However, it also comes with closing costs.
Closing costs are fees incurred from completing real estate transactions. Generally, they range from 3% to 6% of the total loan amount or mortgage. Below is a breakdown of fees commonly included in refinancing closing costs.
- Application fee: A charge for processing the loan, which may include a credit check or appraisal.
- Origination or underwriting fee: Lenders charge approximately 1% of the loan amount to process and underwrite the refinancing.
- Credit check fee: Lenders will review your credit history to determine creditworthiness.
- Appraisal fee: Paid to the appraiser for assessing your property’s fair market value.
- Survey costs: Paid to a surveyor to confirm exact property lines, including shared fences.
- Title insurance premium: Title insurance protects you against possible errors with ownership records.
- Title search fees: Lenders will look at the property record to check for liens, ownership issues, or restrictions.
Closing costs may also include property taxes and homeowners insurance, among others.
Can You Negotiate Closing Costs on a Refinance?
Yes, mortgage refinance closing costs are negotiable. You can arrange closing fees to be lower than originally presented. Often, you only have to ask your lender to save on expenses. Here are some other tips that can help you negotiate lower costs.
Ask for Reduced Lender Fees
Lenders will charge for loan applications, but if you’re getting refinancing from the same creditor, request a lower rate or partial waiver since you have an existing account with them. Some lenders offer perks like this to their loyal clients, especially good payers.
Know the Rebates & Incentives You’re Entitled To
Lenders offer rebates, discounts, and incentives, but borrowers rarely catch wind of these until they inquire. Before accepting the final amount, ask if you qualify for their discount program.
How to Lower Closing Costs When Refinancing
Now that you know refinance closing costs are negotiable, there are even more ways you can bring them down further.
Solicit quotes from other lenders to compare terms. Besides the interest rate, look at the closing costs and included fees. Make sure you get the “Loan Estimate” form as it provides more comprehensive details for comparison.
Compare Third-Party Fees
Third-party vendors like credit reporting agencies, appraisers, home inspectors, surveyors, escrow agents, and title insurers will charge differently for the same service. Some lenders allow borrowers to source their own. Ask which services you can obtain at a lower rate, but note that appraisals and credit reports are often excluded.
Improve Your Credit Score
Besides lower interest rates, having a good credit score gives you leverage during bargaining. Stellar credit history makes you an attractive client for most lenders, allowing you more room to negotiate fees.
Consider No-Closing-Cost Refinance
Closing costs are inevitable, but there is a way to reduce their burden on your finances. Instead of settling them upfront, a no-closing-cost refinance lets you integrate them into the new loan or pay a higher interest rate for the same principal amount.
Be sure to do the math—such an arrangement may not be the right choice if you do not plan to stay long in your new home.
Call Fort Myers Mortgage Experts Today to Know Your Refinancing Options
Closing costs often account for 3% to 6% of the loan amount, deterring some borrowers. Fortunately, there are some negotiable closing costs on a refinance, effectively bringing down your total expenses.