So you’re finally ready to refinance your home.  You’ve decided on clearly defined goals for your financial future, maybe to consolidate your bills, and you’ve carefully shopped around to find the best rate.  As an added bonus you’ve found a lender that you feel you can trust.  Now, all you’ve got to do is compile your paperwork and, voila, you are ready to pull the trigger and begin saving a lot of money.  But hold on just a moment…have you considered the fees…I mean all the refinance fees that may be associated. 

Make no mistake; there are a lot of fees that can accompany your refinance.  Moreover, much like buying a new car, some of these charges do nothing but put money in the pocket of the lender or broker.  Before you go diving into a mortgage refinance it might be the perfect time to get a handle on some of these fees.

Of the typical fees out there, the broker or lender fees tend to be the ones that you most expect and maybe rightly expect as part of the process.  They can also be some of the most expensive and avoidable of the fees.  One such fee is the origination fee, which is the cost of evaluating and processing the loan.  Be forewarned that some lenders charge this in conjunction with or in addition to an application fee.  These types of fees can also fall under terms such as administration, document preparation or processing fees.  Likewise, so called discount points are another mechanism lenders use to profit, by having you pay cash up front in return for a lower percentage rate.

Another class of fees relates to outside or third-party agencies.  For example, there may be fees for property appraisal and credit reports.  In some circumstances, there may be legal fees involved in order to conduct the closing.  Yet other circumstances may require a survey to be done to ensure the condition of the land and structures on the premises that might negatively impact a future sale of the property.  Also, you can expect to be charged a fee for recording the deed.

Another type of fee relates to verifying that you actually own the property through a title search.  This same type of fee usually pays for insurance to cover your lender in the event of discrepancies on the title.  In many cases, Federal Housing Authority (FHA) insurance or private mortgage insurance (PMI) will be required and add fees to the refinancing.  Where states permit it, you may also be liable for early prepayment penalties if your lender writes these into the refinancing.  You definitely need to find out ahead of time whether your refinancing loan has this written in and whether your state allows this. 

So what do you do?  Well, first, most experts recommend dealing only with lenders who fully disclose their fees ahead of time in writing.  This “good faith estimate” is supposed to allow a borrower to review all the fees involved and allow time to ask your lender for a reduction in some of them.  Be forewarned that some lenders are not necessarily forthcoming with their “good faith estimates”.  As with other financial endeavors, do your homework and have specific amounts in mind regarding what you are willing to pay for the negotiable refinance fees.  Family, friends and co-workers who have been through the process recently are an excellent resource as well.  Refinancing your home is an important financial undertaking and above all, you need to understand all aspects of the total cost before you are sitting at the table with your broker.