With the recent mortgage rates dropping down to the low 5.0% range my husband and I decided it was time to look into refinancing our current mortgage.

While I represent both buyers and sellers in their real estate transactions in Humboldt County CA and am aware of all of the lending fees you have to pay up front, I forgot that the process to refinance your loan is similar to buying a home and being in escrow again.  The fees are the same, just a bit less than what you would spend if you were getting a loan to buy a house.

So we called our lender Jason at Bank of America and got a quick quote at how much cash we would need to come in with up front.  He said around $4000, which included the 1 1/2 points to get our interest rate down a little lower.  But when we got all the documentation in the mail, our HUD statement estimated us paying about $6000 in fees, loan points, etc. 

Huh?  How did we go from $4000 to $6000?  Not that it would make a difference in our decision, because either way, we were going to save quite a bit by going through with the refinance, but we wanted to understand what the $2000 discrepancy was.

So we called our lender immediately to clarify this and he mentioned that some of the fees posted on the HUD statement were off a bit, because Bank of America will sometimes grossly overestimate rather than be under the mark.  He explained to us what we would be paying up front and reassured us that his original estimate of $4000 would be closer to what we would pay.

It really is like buying a house (with out the seller or the agents as part of the transaction) in terms of the fees involved.  Since you have to open up escow there are escrow fees, title fees, transfer tax and other fees just like when buying a house.  So if you refinance your home plan on paying several thousand dollars to cover all the fees it takes to reduce your monthly payment.  And if you don't understand what all those fees are for, set up a meeting with your lender to go over them with you.  Make sure you understand where those fees come from and also what they add up to = estimated total fee amount.

For us in the end, even having to spend $4000 to get our monthly payment lower, is well worth it.  So just make sure you weigh the options you have and make the decision that's going to be best for you.  We're glad we've decided to move forward on our refinance.  How about you?

Copyright 2009 Jessica Bigger.  *Refinancing?  Make Sure You Know All the Fees Up Front.*