Refinancing comes with closing costs, just like original mortgages. Closing costs vary, but they can be 2 to 5 percent of the loan amount. On a $100,000 refinance, closing costs of 3 percent would be $3,000 — not an insignificant sum.
You should try to negotiate with your lender to see if the fees can be lowered. The lender may offer to let you fold the closing costs into the loan, so you don’t have to come up with the cash upfront. But that means you’ll also be paying interest on the extra amount. Instead, ask whether the lender would be willing to waive part of the closing costs, such as the application fee or credit check fee. Particularly if you are a repeat customer, you might be able to work out a better deal.
Since the goal of refinancing is saving money, you’ll want to calculate how long it will take you to break even on the closing costs and start realizing actual savings. Our refinance calculator helps you quickly figure how long it will take you to recoup closing costs so you can decide if refinancing is worthwhile.
Source: thesimpledollar.com