There are some additional fees you might
face when you
refinance,
depending on your lender, where you live,
and your financial situation.
You may encounter upfront fees in the form
of
discount
points,
which require you to prepay
interest
on your
mortgage.
Each point is 1% of the loan amount. For example, on a $90,000
loan with three points, you’d prepay $2,700.
You may be able to negotiate the number of
points you pay, which will be due to the lender at the closing.
Although they’ll increase your closing costs, discount points
will permanently lower your interest rate. So, if you’re
planning on staying in your home for more than a few years, paying
more points could work in your favor.
Prepayment penalties
Depending on the terms of your existing mortgage,
you may also owe a prepayment penalty when you refinance. That’s
a charge the lender makes if you pay off your mortgage early for
any reason. A number of states forbid such charges, but the rest
don’t. Most experts advise you to avoid taking a loan with
a penalty, if you have the choice.
