QUESTION: I am refinancing my mortgage and was told there were no out-of-pocket costs. Now as we approach the closing, the lender wants me to pay several hundred dollars. What’s the deal?
ANSWER: When you get a mortgage loan, you often have the option of adjusting the interest rate by either paying discount points for a lower rate or receiving money back in return for a higher rate. In a refi with no out-of-pocket costs, you actually are receiving a premium back from your lender in exchange for a slightly higher interest rate. This premium is being used to offset your closing costs.
Because some of these costs are based on your individual situation, you might have to bring a few hundred dollars to closing to balance everything out. Some of the fees being charged to you have to match what you were promised in the beginning, such as the state transfer taxes and the bank’s origination charge. Other fees, such as the appraisal and title insurance, can’t increase by more than 10 percent.
Finally, other charges, such as your land survey and homeowner’s insurance, can change without limitation to reflect their actual cost. You have to be an educated consumer, even if your loan was advertised as no cost to you. You should talk with the closing company to see if you can get any credit for showing an old survey or submitting the title insurance policy that you got when you bought the home. As with any transaction, shop around and negotiate prices with all the vendors.
Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter GarySingerLaw.
The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.