The Real Cost of Refinancing Your Home Mortgage

Jul 27, 2013

real_estate_conceptWhile homeowners have a lot of reasons to refinance, they also have concerns. One of the reasons they frequently site for not wanting to refinance is because they don’t want to take on the additional fees required to do so. While there certainly are typically fees involved, it’s also true that they may not be as much as you think they are. When you apply to refinance, you’ll get what’s known as a “Good Faith Estimate,” otherwise known as a GFE. It has the total closing costs listed at the bottom, which many people believe is the cost of refinancing.

 

However, this number can be misleading. When you get this number when you’re considering refinancing your home mortgage, keep in mind that included in the number is the partial month interest, homeowner’s insurance that goes to escrow, and property taxes that go to escrow. These are all fees that you pay every month – whether you refinance or not. The best way to see the real cost of refinancing is to subtract these amounts from the GFE. You can then take a look at the actual loan origination fees to decide if the cost of refinancing outweighs the benefits.

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