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5 Ways to Negotiate Closing Costs on a Refinance Loan

First Capitol Property Management - Thursday, January 28, 2021
Property Management Blog

Have you been contemplating the idea of refinancing the mortgage loan on your investment property? Now may be the time since trends show an increase in rates by the end of 2021. Average refinancing rates for an investment property at a 15 year fixed rate are ranging between 2.38- 3.40% APR. (To look up rates specific to your property value, go to www.thesimpledollar.com and enter your stats into the calculator).

Maybe you've decided you want to refinance ,but don't want to pay all that money in closing costs. There are certain fees that can be negotiated with on your closing costs during refinancing.

You could choose a No closing cost mortgage. Maybe you're not forking out the money upfront, but those costs will be tacked onto the end of your loan, therefore accruing interest and you'll be paying more in the long run.

Or, you could  choose to negotiate your closing costs. Here are 5 ways to negotiate your closing costs:

  1. Compare loan estimation forms between lenders. Within 3 days of applying for a loan or refinance, your lending institution is required to send you this form. Details of fees will be displayed as well as rates of other lenders. Use this information to negotiate rates with the lender of your choice.
  2. Ask about lender fees. Know what fees your lender charges up front. Got a great credit score? Good, use it as leverage to negotiate on your interest rate.
  3. Does your lender offer rebates? Sometimes when you choose a lender who you already have a relationship with, they may offer you rebates.
  4. Finalize your loan papers at the end of the month. Between closing and your first loan payment, you will pay interest each day (per diem). By signing the paperwork at the end of the month, you will be saving yourself in interest.
  5. Shop around for service providers. There are some non-negotiable fees that will be specified on page 2 of the loan estimation report such as tax fees, flood certification fees, recording fees, etc. However, there are some fees that you can request to use a provider of your choice such as:

Title Fees- Lenders will use a title company, to verify title and title insurance. You can request to find a title company of your own to do the research, at a cheaper rate.

Origination/ underwriting fees - these fees typically cost about 1% of your loan amount. However, different lenders may charge different amounts. Educating yourself on lender rates, may save you money in the end.

Lock Rate Fees

Application Fees

Buying Points- fees can be paid to the lender in exchange for a lower interest rate. This will lower your monthly payment, but shop around! Different lenders offer different interest rate reduction per points.

Refinancing your loan can help you save money, but if you are paying too much in closing costs; is it really worth it? Know your options and you may be able to make it worth your time.