With interest rates being at the lowest level in decades, many clients are again considering to refinance their existing mortgage on their home. Here are a few things you may be able to do to lower the closing costs in connection with your refinance:
1. Request that the loan be structured as a Consolidation,Extension and Modification Agreement (CEMA). What this means is that instead of taking out a whole new loan and having to pay mortgage recording tax on the entire new loan amount, you will assign your existing balance on the original loan to the new lender and pay mortgage tax on only the amount above the existing loan (the new money). This will require additional work and cooperation of both the existing lender who will be required to prepare an assignment of mortgage, and the new lender who in addition to preparing the usual mortgage documents will prepare the consolidation, extension and modification agreement.
2. Request a reissue rate on the title insurance. The lender will require an updated title insurance policy at the time of the closing. If you purchased the property less than 10 years ago, you are eligible for a discount on this policy. If you are represented by an attorney at the closing, make sure he or she requests this discount for you.
Refinancing makes sense if you are able to reduce your interest rate by approximately 2%. Another consideration is how long you plan to stay at this home. If your plan is to stay put for at least another 7 years, it is probably in your best interest to refinance. In this case the amount you will save in interest should be greater than what you spend in closing costs.
My final suggestion to you is to make sure you are represented by an attorney on your refinance transaction. Many lenders will downplay the need to spend money on an attorney on such a “cut and dry” transaction. Many people will close without representation only to discover later on when they come to my office to review their file that they did not receive the benefit of some of the points mentioned above.
So if these low interest rates are tempting you to look into refinancing, make sure you seek the advice of an experienced real estate attorney.
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