Curve

How to negotiate refinancing costs

Pete Gerardo
The Mortgage Reports contributor

Refinance for less

Not everyone is comfortable haggling for their best deal or seeking concessions when they buy things. This lack of negotiating savvy is no big deal unless you’re actually shopping for a big deal – like a new mortgage.

When you want the lowest possible rates and best terms knowing how and what to negotiate could save you thousands of dollars a year.

Verify your new rate (Jun 24th, 2019)

Don’t pick your own pocket

The most important action you can take when preparing to refinance is to comparison shop.

This means requesting mortgage quotes from several competing lenders, evaluating their interest rates and fees, and choosing the best deal.

Shopping accomplishes two things. First, checking out several programs helps you recognize a good deal when you see it. In addition, approaching lenders with competing deals in hand may pressure them to come up with better offers.

And that’s just the start of what you can achieve by sharpening your bargaining skills.

Simply obtaining rate quotes from multiple lenders could improve your refinance rate by 0.5 percent, according to the Consumer Financial Protection Bureau (CFPB).

If you think that’s small potatoes, consider this: a rate reduction from 4.5 percent to 4.0 percent on a $200,000,  30-year conventional loan equals $60 per month – nearly $22,000 over the life of the loan.

Unfortunately, the CFPB reports, 47 percent of borrowers don’t do this – potentially making nice gifts to their mortgage lenders.

Show Me Today's Rates (Jun 24th, 2019)

It’s about the bottom line

Mortgage disclosures may contain a variety of fees – those imposed by the lender, those required by the government, and those paid to third parties like appraisers, and prepaid expenses like property taxes and homeowners insurance.

These fees must be disclosed upfront — by law, mortgage lenders today must issue a “Loan Estimate” within three business days of receiving your mortgage application, and many will give it to you if you ask for a mortgage quote.

The Loan Estimate outlines the various terms of the loan, including the interest rate, estimated monthly payments and charges.

The form breaks closing costs into several sections, which disclose different types of charges as explained below.

Lender charges

Section A of your Loan Estimate lists the lender charges. It doesn’t really matter what the lender fees are called – processing, underwriting, origination, ice cream – the names are immaterial; it’s the total that matters. Just negotiate the lowest total lender charge for that interest rate.

Third-party vendor fees

Third parties can include home appraisers, credit reporting agencies, home inspectors, escrow services and title insurers. Some services are negotiable and others are not. Those listed in Section B are not negotiable, while providers listed in Section C can be chosen by the borrower, and those fees may be negotiated.

Non-negotiable charges

Credit reports, flood certifications and appraisals fall under Section B. Lenders choose providers and then pass the fees on to borrowers. You have no say in this. However, by law, only the actual cost can be passed on to you – the lender cannot mark it up.

Title and escrow

Title and escrow services usually fall under Section C and can be chosen by borrowers if state law allows it.

You can often reduce your title insurance premium by having your current provider re-issue your policy instead of purchasing a new one from a different company. This discounted premium is called a “short rate” or a “re-issue rate.” Typical discounts run between 20 and 40 percent.

It’s not that hard

Shopping for a refinance mortgage is easier than it’s ever been, thanks to the wealth of information available online.

Simply contact several competing mortgage lenders and request mortgage quotes. Some lenders will issue a loan estimate right there; others will create a worksheet or scenario.

What are today’s refinance rates?

Today’s mortgage rates continue to make refinancing pay for many consumers. Check out current offers from mortgage lenders and see if you can pay less.

Once you have your quotes, circle back to your lenders and see which one comes up with the most attractive offer.

Verify your new rate (Jun 24th, 2019)