How your mortgage fees are accounted for when refinancing

When you refinance your mortgage, someone is on the hook for paying fees. Who Following are the only ways loan fees can be accounted for when refinancing….

When you refinance your home closing costs are an inevitable component that must be paid for the transaction to successfully fund and close escrow. Here are the two bar none ways fees are accounted for; Lender paid where the lender pays the closing costs associated with your mortgage based on the interest rate you choose.

For example, let’s say you are being quoted a 30-year fixed rate at 3.875% at no points and you were comparing that to a rate of 4.25% with a lender credit at $3k. The lender credit for $3000 at 4.25% interest rate would cover the closing costs associated with your loan. This is called a no points no fees loan. It is also sometimes referred to as a no-cost refinance. Borrower paid-Borrower paid closing costs means these monies are rolled into the loan amount or paid for with cash due at closing.

For example, if you owe $300,000 on your house and you’re rolling your closing costs into your mortgage your new financed loan amount would be $303,000. The other way with borrower paid closing cost is bringing the monies due to closing. Do not be fooled if you’re rolling your closing costs into your mortgage that is not a no-cost mortgage.

Some lenders might try to convince you otherwise, but that is not accurate. Any closing cost you are rolling into your loan means that you are paying fees associated with your refinancing your mortgage. No cost loans only work with you taking a rate above market to generate an overage to pay the closing costs associated with your loan. Alternatively, gift money is always a possibility on a primary refinance residence transaction.

Such a scenario would fall into the category of being borrower paid since it’s being paid for on behalf of the borrower by another party. When you are comparing mortgage offers make sure when you were going over the terms with your lender you specifically know what party is paying what fee so you can decide the most makes sense option for you.

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