When you refinance your mortgage, you usually pay off your original mortgage
and sign a new loan. With a new loan, you again pay most of the same costs
you paid to get your original mortgage. These can include settlement costs,
discount points, and other fees. You also may be charged a penalty for paying
off your original loan early, although some states prohibit this. The total
expense for refinancing a mortgage depends on the interest rate, number
of points, and other costs required to obtain a loan. To obtain the lowest
rate offered, most mortgage companies will charge several points, and the
total cost can run between three and six percent of the total amount you
borrow. So, for example, on a $100,000 mortgage, the company might charge
you between $3,000 and $6,000. However, some companies may offer zero points
at a higher interest rate, which may significantly reduce your initial costs,
although your payments may be somewhat higher.
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