Rates on 30-year, fixed-rate mortgages have just dropped to around 5.3 percent. If you haven’t refinanced your home loan recently, and you have a mortgage at a higher rate, you might save money by refinancing your old loan. When you make your decision, don’t forget to include these costs:
* Lender fees. You might pay the lender for handling origination, applications, credit reports, and appraisals. You also might pay points for bringing down the interest rate on the loan.
* Third-party fees. You may have to pay additional costs for a title exam, title insurance, recording, and closing.
The total costs might be as much as 3 percent of the amount you’re borrowing: $3,000 for each $100,000 of the loan. Your lender will provide you with an estimate of the closing costs soon after your application has been received.
Once you have an estimate of the total costs, you can see if it makes sense to refinance. If your costs are $6,000, for example, and you will cut your monthly costs by $300 a month, it will take you 20 months to recoup your costs. Refinancing will make sense, in this example, if you plan to stay in the home much longer than 20 months.
