Saving Money on a Mortgage Refinance

The key to successful financial management is saving money wherever possible. That’s one of the reasons that mortgage refinancing has become extremely popular. Rates are lower than they’ve been in 50 years, and savvy homeowners are taking advantage of this opportunity by jumping on the refinance bandwagon. In addition to lowering your rate, there are additional ways to save even more money when you refinance your loan.

Cut your closing fees

Closing costs will generally run you 3 to 6 percent of your loan amount. For a $300,000 refinance, that can be as high as $18,000. Certain third-party costs, like appraisals, attorney fees, credit reports, and title searches and insurance are out of the bank’s control.  But when the charges come directly from the bank itself, there’s room for negotiation.

Begin with application fees and administrative expenses. If you’re a customer with good credit, the bank may be willing to lower these fees, or abolish them completely. Other items that may be negotiable are settlement costs and underwriting fees.

Pay closing costs upfront

It seems like a great idea to roll your closing costs into the mortgage amount, because it means that you can refinance without taking any money out of your pocket. But is it really?  Increasing the size of your mortgage means you’ll be paying interest on these funds. On a $300,000 refinance at 5 percent, closing costs can be as high as $18,000. Over the course of 30 years, you’d pay $34,786 for the privilege of not paying them at closing. Pay them upfront if you can afford it.

Automatic satisfaction

If you allow the bank to withdraw your mortgage payment directly from your bank account each month, you may be a candidate for a lower interest rate. You have to make the payment anyway, so why not take advantage of this money-saving opportunity? You’ll also save the hassle of remembering to make your payment in a timely manner.

Lower your term

Opt for the shortest term that you can afford. If you refinance for 15 years, you’ll save thousands of dollars over the life of the loan as compared to a 30-year mortgage, and you’ll even get a lower interest rate. You’ll build home equity more quickly, as well, and be a mortgage-free homeowner at a younger age.

Raise your credit score

There’s not much you can do in the short-term if you’ve been delinquent in your bill payments and have a less-than-stellar credit rating.  First, check your credit report to make sure that there are no errors that are causing you to have a lower score than you should. If you’re getting the mortgage with a spouse, and one has a significantly higher credit rating than the other, you can opt for getting the mortgage in the name of the spouse with the better credit history.

You’re doing a mortgage refinance to save money. If you can capitalize on these suggestions, you can help leave more money where you’d like it – right in your pocket.