Refinancing your Georgia home can be an excellent way to reduce your interest rates and save money on your monthly mortgage payments. You can also transfer an adjustable-rate mortgage to a fixed-rate mortgage, getting you a better interest rate, or utilize your equity by getting a new product with a higher loan-to-value ratio.
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However, you must consider all the refinancing costs to ensure you’re not losing money. This article will review refinance costs in Georgia so you can make the right decision for your financial situation.
Understanding Common Hidden Costs in Mortgage Refinancing
Refinancing costs include lender fees and expenses charged by third parties and the local government. The most common costs during the Georgia refinancing process include the following:
Origination Fees
Lenders or the mortgage program charge a loan origination fee to cover the cost of the refinance process. This fee can include an application fee, attorney fees, administrative charges, underwriting, title search, and other fees like surveying.
These are included in closing costs and will be paid as a lump sum. A conventional loan in Georgia will be between 0.5% and 1% of the total loan.
Every lender charges slightly different refinance fees. Therefore, it’s crucial to consider these costs when deciding which lender to use.
For VA loans, you will also need to consider the funding fee, while with an FHA loan, you need to consider upfront mortgage insurance premiums. These aren’t the same as origination fees but are still significant in closing costs.
Appraisal Fees
Conventional loans require an appraisal to determine your home’s worth, as your home equity determines your loan terms. A higher market value means more equity, better interest rates, and lower monthly payments.
The average cost of appraisals in Georgia is around $600 for a single-family home. However, you may be able to secure an appraisal waiver for certain products, including FHA loans.
Title Search and Insurance Fees
For a mortgage refinance, a title search ensures that you are the lawful owner and have the right to pursue a refinance loan. Similarly, title insurance protects you and the lender from title contestations.
While your home loan lender may have a preferred title company, you can shop around for this expense, saving you hundreds of dollars.
Government Recording Fees
When you switch out your current mortgage with a new mortgage, you must register this with your county. Thanks to a law passed in 2019, government real estate recording fees in Georgia are a flat $25 per document, no matter how many pages.
While this is a small expense, it’s still important to factor this into your budget.
Prepaid Expenses (Taxes and Insurance)
An escrow account holds prepaid expenses, including property taxes and homeowner’s insurance. Some companies expect you to hold two months of your monthly payment and private mortgage insurance in your account.
This can be a significant chunk of your closing costs, so you must save ahead of time for these expenses.
Discount Points
You may also choose to pay another closing cost: refinance discount points. These help reduce your interest rate, so you’ll spend less on your monthly mortgage payment.
Calculate your break-even point to determine how much you should pay in discount points. This point refers to how long it will take to recoup your upfront investment through your monthly mortgage savings.
If you intend to stay in your home longer than this length of time, then mortgage points may be a good idea as part of your closing costs.
Hidden Costs Specific to Georgia
While these closing costs are almost universal when seeking a rate-and-term or cash-out refinance, some additional expenses are specific to Georgia, and you must account for them.
Georgia Intangible Tax
When you pay closing costs, you must consider Georgia’s Intangible Tax on refinances, which is $1.50 per $500. For example, if you have a $200,000 mortgage, you will pay about $600.
However, there are some exceptions. If you are working with your original lender, you may be exempt. With cash-out refinances using your existing lender, you may only need to pay the difference between the current loan balance and the new loan. For example, if your new mortgage is $50,000 more than the original loan amount, you would pay only $150.
Local Taxes and Fees
Lastly, various local taxes and fees apply to real estate transactions across municipalities. Therefore, it is important to research your local fees before researching your refinancing eligibility.
Strategies to Avoid or Minimize Hidden Costs
When refinancing in Georgia, consider these strategies to protect your financial health:
- Compare mortgage loan estimates from different lenders to determine the lowest closing costs.
- Negotiate with your lender to reduce closing costs. Those with higher credit scores or a low debt-to-income ratio can often get concessions from their lender.
- Consider a no-closing-cost refinance to save money upfront. A no-closing-cost mortgage can roll the closing costs into your monthly payments or waive them in exchange for a higher interest rate.
- Time the market to secure a lower interest rate, which will help ease the burden of closing costs.
- Seek advice from mortgage professionals to learn how you can lower your fees.
Additional Tips for Georgia Homeowners
In addition to these strategies, consider the following points:
- Understand the Georgia closing cost refinance laws to ensure you’re not being overcharged.
- Use the Georgia Dream Homeownership Program if you are eligible. This program helps you qualify for good rates even with a low credit score or gross monthly income.
- Look for local tax deductions, allowing you to deduct your mortgage interest.
- Order a credit report and pay attention to your credit score for attractive rates.
Summary: Refinance Hidden Costs Georgia
The average closing costs for mortgage refinancing in Georgia are around $2,727. While this is lower than for a comparable purchase loan, and you don’t need a down payment, it can still put financial strain on you.
Thankfully, District Lending is here to help. We can help you find the right rates for your circumstances and offer helpful advice! Contact us today to discuss your options, or get a free quote online. Whether you’re seeking a different loan term or a better rate, we’re here to help.