Obtaining a loan to purchase a home can be an expensive proposition. Many times, people may be tempted to re-negotiate their older, higher rate mortgage when rates come down. It is important to consider this carefully and be sure any savings you have are not eaten up by the closing costs on the loan.

When a bank establishes a mortgage, it incurs expenses to do so. For the most part, many of these expenses are not determined by the bank, but are fees they are charged and pass onto the borrower. There are some fees over which the bank has control, and if they are aggressively seeking new loans, they may reduce or eliminate them.

Closing costs can include: -Application fee -Origination fees (or points) -Attorney fees -Transfer taxes -Recording fees- -Appraisal -Surveys and

There may be taxes and additional fees by the state as well.

As a prospective re-financer, you may want to know which of these costs can be reduced, or even eliminated, such as their application fee, and which are not under the bank’s control. As we mentioned, sometimes lenders are aggressively seeking new clients, and they may have special programs where certain fees are waived. The application fee is the most often waived, since this is a charge the bank itself makes. Other fees, that are just pass-through fees, such as attorney fees or appraisal fees will most likely not to be waived.

One of the first steps you should take is to get a good faith estimate of the closing costs. Then you can analyze them. One of the dangers of being offered a lower rate may be that the bank inflates the closing costs to make up for the reduced loan rate.

You can get an estimate from other banks, and then you will be able to compare the line by line items. If your bank’s charges seem a great deal higher, you should question them. Some fees, such as an appraisal or a credit check, should be fairly similar in the same geographic area. If there are exorbitant charges, ask to negotiate them.

After you have negotiated lower closing costs as much as you are able, you should now make sure the deal is worth it. Mortgage calculators are available on the net, and you can calculate the total cost left on your current loan and the total cost of the new loan.

Don’t forget that the new loan will now also cost all of the closing fees you will have, so add them to the calculation. You will now know whether or not a re-financing is a good idea or not. This is not a lot of trouble to go to since it may save you a substantial amount.

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