Refinancing closing costs?

[hillymum]

My darling brainless dh wants us to refi our house. The amount saved would be really useful but I am stunned by the closing costs. $12,000!!!! Surely this is way high? Please give me some round figures you have paid, or been quoted. I don't know if the size of the mortgage is the reason, does closing cost go up depending on the mortgage amount?

[cristeen]

Yes, closing costs can go up based on the loan amount - particularly if you're having to pay for the interest rate. But unless you have a really expensive place in KY, I'd have to question $12K. I'm in CA in one of the most expensive areas, in the middle of a refi and only paying about $4K.

[_betsy_]

We were quoted anywhere from $4K to $8K on a 2-bedroom condo refi. We called our current mortgage holder and got the best deal/rate - we have the inspection tomorrow. Fingers crossed he has a good, high number for us!

[cschick]

Originally Posted by hillymum

My darling brainless dh wants us to refi our house. The amount saved would be really useful but I am stunned by the closing costs. $12,000!!!! Surely this is way high? Please give me some round figures you have paid, or been quoted. I don't know if the size of the mortgage is the reason, does closing cost go up depending on the mortgage amount?

We were looking into refinancing about $290,000 and the estimated closing costs were just on $3000. Everyone I know who has done a refi recently has paid $3000-$4000 in closing costs, in our area (Cook County, IL or collar counties: Kane, DuPage, McHenry, etc).

[amandaleigh37]

We were just given a quote for refinancing our $85k mortgage, and the closing costs were $3000. (This is rural Indiana.)

Another bank had a higher interest rate but only $800 closing costs.

[Eman'smom]

We were told roughly 2% of the mortgage, also they told us we'd need to pre-pay a year of escrow. (we'd get our current money back that is in escrow,after the fact). So if you have high property taxes/high insurance that could be part of that number.

[hillymum]

Yea, what you're all saying sounds right to me, so the closing costs quoted to dh are outrageously high. guess I need to have a chat with him.

[Carson]

Originally Posted by hillymum

Yea, what you're all saying sounds right to me, so the closing costs quoted to dh are outrageously high. guess I need to have a chat with him.

You need to look at the GFE and see what it includes, get another one from a different lender and compare the two. Compare it to something like this.

[mightymoo]

I never pay any closing costs, I do only no points, no closing costs mortgages personally.

It sounds to me like you have a broker who wants to reel you in with what sounds like a great rate, but he's giving you the great rate by adding several points onto the loan. With no points, its generally reasonable (and it varies obviously) to expect around $3-4K in closing costs, $12K is definitely high for a conforming loan. Brokers can adjust how much they charge you in closing costs however, by giving you a higher or lower rate. Chances are with really low closing costs (say under $1000), the broker is selling you a slightly higher rate to pay for those closing costs (this is what my no closing costs broker does).

Generally, with a point, you "buy" a lower rate. Generally 1% of the loan amount is the cost of the point, and it buys you 1/8th of a percent off the loan. (A decent explaination here: http://www.homebuyinginstitute.com/m..._article12.php) Often, points are lumped in with closing costs, and that's my guess of what you got.

Definitely talk to more than one bank/broker.

[hillymum]

Originally Posted by mightymoo

I never pay any closing costs, I do only no points, no closing costs mortgages personally.

It sounds to me like you have a broker who wants to reel you in with what sounds like a great rate, but he's giving you the great rate by adding several points onto the loan. With no points, its generally reasonable (and it varies obviously) to expect around $3-4K in closing costs, $12K is definitely high for a conforming loan. Brokers can adjust how much they charge you in closing costs however, by giving you a higher or lower rate. Chances are with really low closing costs (say under $1000), the broker is selling you a slightly higher rate to pay for those closing costs (this is what my no closing costs broker does).

Generally, with a point, you "buy" a lower rate. Generally 1% of the loan amount is the cost of the point, and it buys you 1/8th of a percent off the loan. (A decent explaination here: http://www.homebuyinginstitute.com/m..._article12.php) Often, points are lumped in with closing costs, and that's my guess of what you got.

Definitely talk to more than one bank/broker.

Thank you for that second article in particular. I already made the calculation they suggested and worked out it would take 31 months to break even which isn't too long, but as dh works in a different state, and will as long as we live here, I can not be sure we will not want to move in ine or two years, and neither can he.

[wifeandmom]

We just did a re-finance to get a lower interest rate. When it was all said and done, it cost us roughly $10K to complete the process, and this was a VA streamline refinance where they can only charge you so much by law. We bought 1.375 points, which is included in that $10K figure. And we paid a year of upfront escrow costs, which was about $6K and not technically considered part of "closing costs".

So, I suppose you could say we paid $4K in closing costs and $6K in pre-paid escrow costs. We'll get about $3K back in the next 60 days from our original mortgage company where we've paid into our escrow account so far this year, then we'll likely get another $2-3K back next spring after the new lender pays our property taxes and insurance and we still have too much in escrow.

[nannymom]

When you guys say you paid 10,000 or more do you mean you rolled it in to the loan or you came up with that money? We are about to refi our condo and it never occured to me that the rates could be anything like what you guys are talking about.

I had assumed they would be avergae closing cost rates between $3-4,0000 and that we could just roll them in.

This is scaring me.

[mightymoo]

Originally Posted by nannymom

When you guys say you paid 10,000 or more do you mean you rolled it in to the loan or you came up with that money? We are about to refi our condo and it never occured to me that the rates could be anything like what you guys are talking about.

I had assumed they would be avergae closing cost rates between $3-4,0000 and that we could just roll them in.

This is scaring me.

If you don't buy any points, then you probably could get that in closing costs.

But keep in mind, on top of the closing costs are two things, prepaid interest and escrow. If you are refinancing, you are not really 'paying' these so much as you are fronting them and then getting them back later.

Escrow is pretty straightforward - the bank maintains an account to pay your taxes and insurance, you pay into each month, and they generally want a buffer. So when you refi, you need to start by seeding this account with the buffer basically. Now, since you are refinancing, you already have an escrow account with a buffer in it, you'll get this money back after that loan is paid off. So you are not out any more money, you just have to front it when you refi and get it paid back later.

Prepaid interest is similar. Say you pay your mortgage payment on the 1st of the month, but you refi on the 15th. Mortgage interst is paid in arrears, except at the very begining. So, you've paid your old mortgage June 1st, then you refinance on the 15th. On the 15th you will pay off the old mortgage, so you've paid the interest on that from June 1st to June 15th. Your first new mortgage payment will not be until August 1st. The bank will require you to prepay the interest from June 15th (the refi date) until July 1st (the start of the 1st full mortgage cycle) at closing. However, since you don't make a July 1st mortgage payment, you also kind of get this money back.

So as I said earlier I do no closing costs mortgages personally, but escrow and prepaid interest are still included, they aren't part of the costs of closing, the escrow is money being set aside and the interest is part of what you owe on the mortgage, but they are due at closing. So, even though we do no closing costs mortgages, we generally have to bring something like $3-6K to closing, all of which we get back later in either saved payments or the returned escrow from the old mortgage company.

It really doesn't make sense to quote closing costs including these figures becuase they vary greatly depending on your taxes, insurance and size of your loan. Similarly quoting closing costs including points is equally insensible because the points are based on the size of the loan, a point for a $200K loan is $2000 where a point for a $400K loan is $4000 (1% of the loan amount usually).