Closing costs are not just for when you purchase a new home. When you refinance your home, you must pay closing costs as well. It is essential to budget for closing costs when you plan to refinance your home. There are five common closing costs you will have to pay when refinancing your mortgage.
#1: Application Fee
The first cost you are going to need to pay is your application fee. The application fee is what you are going to have to submit to your lender. This is a fee you are going to need to pay to apply. It doesn't matter if the lender approves or denies your application; this is the set fee you will have to pay.
#2: Appraisal Fee
The appraisal fee is another fee you will have to pay. You will have to hire an appraiser to come out to your home and figure out the value of your property. The appraisal will be used to ensure the value of your home hasn't decreased since you purchased the home. Ideally, you want the value of your home to increase.
The bank wants to know the value of your home to ensure they are not creating a new loan for you that exceeds the cost of your loan.
#3: Inspection Fee
In some states, you need to get a special inspection when refinancing your home. Not all states require special inspections, but some do. For example, you may be asked to bring a pest inspection. Or, if you have a septic system, you may need to get a Title V septic inspection to quality for refinancing.
#4: Attorney Review
When you refinance your home, you are entering into a serious legal and financial agreement. That is why you will want to have an attorney review your refinancing documents to ensure that everything is in order and that your interests are protected.
#5: Title Search and Insurance
Finally, you are going to want to pay for a title search. Even though you should have already undergone a title search when you originally purchased the home, the new lender will want you to undertake a new title search. You will need to hire a title form to perform a new title search on your property, and you will want to pay for title insurance again. This will help protect you.
When you refinance your home, the closing costs will be around the same percentage of the cost of your refinanced mortgage as they were with the original mortgage, around 2–5% of the mortgage cost. It is essential to budget for these closing costs before you start the refinancing process. The closing costs are something you are going to need to pay out of pocket. To learn more, contact home mortgage refinancing services.