If you have ever bought a home, you may have had a surprise when you saw the total of the closing costs. Many times, people may be tempted to re-negotiate their older, higher rate mortgage when rates come down. It is important to consider this carefully and be sure any savings you have are not eaten up by the closing costs on the loan.
Banks, of course, incur expenses to process and close a loan. Needless to say, the bank is not going to absorb these costs, but rather pass them on to the borrowers. (Although, in competitive loan markets, lenders have used lower closing costs as a factor to attract new borrowers, by absorbing part of the fees.)
Here are some typical closing costs: -Application fee -Origination fees (or points) -Attorney fees -Transfer taxes -Recording fees- -Appraisal -Surveys and
Or more, depending upon the province.
If you are sorried about these costs, you may be able to control some of them to a certain extent. Many times banks may make special offers to entice customers to take a loan with them.
One of the first steps you should take is to get a good faith estimate of the closing costs. This gives you the opportunity to look at each of the closing costs and see if any of them can be reduced.
You can get closing estimates from other banks as well, and make a comparison between each item. If some of the fees seem especially high, your bank may be inflating the fees. As examples, the fee for a credit check should be fairly standard, and within the same geographic region, there should not be too much variety in appraisal fees. You can bring these discrepancies to your bank’s attention and ask for reductions to the norm.
Now you are familiar with how much your closing costs are going to cost, and you have made some negotiations in reducing them, you can figure out if refinancing is really going to be worth while by using an online mortgage calculator to find out the costs remaining on your present loan.
To the total cost of the new loan, make sure you add the closing costs, since you will not have them if you stay with your present mortgage. Now you can decide if it is worth taking out a new loan on your home.
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