How to Reduce Mortgage Refinancing Costs

by Audra from Boca Raton, Florida USA

Ask Kate how to reduce mortgage refinancing costs: Hi Kate, Your information on what's included in mortgage closing costs is great but my main question is what can I do about reducing them? They tell me it's going to cost say this much for title fee, how do I know if that's as cheap as you can get it, and if not how do I get it lowered.


Audra continues... Now that it includes all those separate costs, yes I do feel overwhelmed.

I'm trying to refinance with my nationwide mortgage lender under the HARP program. My credit union said the government is actually paying the banks for this so my closing costs should be low, can I somehow negotiate that with the bank and how?

Effective October 3, 2015, the Good Faith Estimate and Truth in Lending forms have been replaced with the Loan Estimate form. Follow this link for up-to-date help with the New Loan Estimate - Know Before You Owe. However, the information on Changed Circumstance found on this page remains pertinent.

Kate Answers: How to Reduce Mortgage Refinancing Costs

***zz-portrait-left.shtml*** Dear Audra,

A borrower's first defense to reducing mortgage refinancing costs is to understand the 2 major categories of legitimate fees.

As you mentioned, these are found at Mortgage Closing Costs Explained - Understanding the New Good Faith Estimate Form. (This page was overhauled and updated in December, 2015)

Were Junk Fees Tossed into the Garbage?

2010 Update!

In spite of the revised yield spread premium disclosure of 2010, lock-in problems mount for borrowers.

Go to New Good Faith Estimate Form for more information.

Before I discuss the second defense to reducing mortgage refinancing costs, let's talk for a moment about junk fees, also known as processing, underwriting, review, administration, funding, warehouse, and you-name-it charges.

For years, borrowers were tricked into paying higher interest rates by loading Good Faith Estimates with vague junk fees. For the most part, the practice of charging junk fees ended up in the garbage where it belonged after the introduction of the Good Faith Estimate 2010 form.

But now there's a new kid in town that you need to meet!

Changed Circumstance Can Increase Mortgage Refinancing Costs

How to Reduce Mortgage Refinancing Costs: No junk fees allowed on new Good Faith Estimate Form
The new kid in town is Changed Circumstance. It is the offspring of the Department of Housing and Urban Development (HUD) and the Real Estate Settlement Procedures Act (RESPA).

You might meet Changed Circumstance if different or inaccurate information regarding you or your transaction surfaces after your Good Faith Estimate is issued.

This is one example of HUD allowing for changes in your loan terms or charges. The significance to you is an increase in fees during the transaction.

But is the use of Changed Circumstance a logical necessity or a sneaky loophole? Actually it could be either, depending on the individuals you are doing business with. For now, be aware, in spite of an initial Good Faith Estimate, you could encounter higher costs along the path of refinancing.

How to Get the Best Mortgage Rates

So you were asking what you could do to reduce mortgage refinancing costs, right? Keep in mind, it isn't as simple as comparing a stack of Good Faith Estimates for the best rate at the lowest cost and then attempting to negotiate the quote even further. Because regardless of how savvy you are at negotiating, if you merely try to bargain for the lowest cost and fees, it seldom turns out well.

Getting the lowest mortgage rates mostly depends on WHO you choose as your lender, the individual representative and the company.

So besides familiarizing yourself with the 2 categories of mortgage closing costs, I want you to turn your focus to shopping for mortgage lenders. But I don't mean googling "lowest mortgage rate" and calling up 3 lenders for a quote.

The best way to end up with the lowest mortgage refinancing costs is choose a reliable and knowledgeable mortgage lender who will treat you fairly and with respect, one who understands Changed Circumstance is not a loophole.

Okay, I can hear you asking, how do I do that? Start here! Ask your friends, relatives, neighbors, co-workers, and local Realtors which lender they had the best experience with.

Would they return to them? Would they send their mother to them for her mortgage? This is a much more effective way of getting the lowest mortgage rate! Go here for more on choosing mortgage lenders.

Surprises in Mortgage Refinancing Costs

One more thing. In spite of revamped Good Faith Estimates making it more difficult to surprise borrowers at closing with junk fees, take your most recent GFE, SIGNED and dated by you and the lender, to the closing of your mortgage transaction and go line by line, comparing it to your HUD-1 closing statement with final fees.

Mortgage lenders are required to issue a revised Good Faith Estimate to you within 3 days of making changes to your mortgage closing costs. So if there is a discrepancy between the two bottom lines, don't leave your closing without a satisfactory explanation or removal of the fee - in writing.

Best wishes,

PS Your credit union may be confusing HARP closing costs which are paid by the borrower with HAMP modification. You can read about lower closing costs for HARP 2 at HARP Mortgage Closing Costs Reduced Part 2.

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Title Insurance
by: Home Owner

Do lenders require title insurance when doing a refinance?

Hi, Kate here. Yes, in most instances lenders require title insurance. However this becomes a point of contention with many homeowners when they choose their current mortgage company for refinancing because they feel their lender already charged once for it.

Sometimes lenders choose to forgo the policy. Always ask so you know what to expect and get it in writing on a good faith estimate. You can read more about the GFE earlier in this page.

More about creating your dream team, including title insurance companies, at How To Get A Mortgage - Meet Your Title Insurance Companies.

Best wishes, Kate

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