House Mortgage Refinance - Closing Costs 101
Closing costs are a necessary evil in the process of house mortgage refinance, which can be a time consuming and tedious endeavor. While you have the option of paying out of your own pocket or financing into the mortgage, the second route will tack on a few grand to the principle of the mortgage. Of course, as with any financial decision, a little research should be done. Most importantly, before making any decisions or applying for a mortgage in the first place, it’s important to understand the two different kinds of closing costs and how they will affect you.
Closing Costs? What are those?
In a housing market where things are not selling very quickly (a “cold” market), it may be feasible to arrange for the seller to take care of the closing costs, however in most cases this is the responsibility of the buyer. In a “hot” market, where property is being sold very fast, buyers should be ready to pay roughly 3 to 5 percent of the total cost of the home. Although closing costs vary from loan to loan, the many steps to apply for or finalize the sale of the house do not. These steps, of course, all cost money. Therefore, if you have not arranged for the seller to take care of the fees for each step, you are stuck with them!
Your mortgage broker, if you are using one, should explain the difference between the fees, and there are two types; Non-recurring and recurring closing fees.
What are Non-recurring Closing Fees?
There are several fees during the closing of a home; appraisal fees, title search, credit reports, and the list goes on and on. Most of these fees are a one-time deal and paid during the closing of the sale.
What are Recurring Closing Fees?
These fees are very similar to the ones above; however, they also require you to pay again every year. These are fees such as interest, property tax, etc. There is also a choice for homeowners to prepay for these services, or tack on the premiums to their new mortgage payment.
Closing and What to Expect
House buyers are informed of the estimated closing costs before finalizing anything, in order to avoid unexpected fees and charges. Potential lenders remit quotes with the estimated fee amounts included in them in order to avoid surprises.
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