Finance Roll

So you're considering refinancing your mortgage... probably a wise idea considering the low, low mortgage rates that exist in the market right now.  However, if you're like a lot of people, a big part of the motivation to refinance revolves around saving money.  Not only because everyone likes to save money, but because with the way things have been going lately, there seems to be a whole lot less of it going around.  This may be particularly true in your personal financial world.

If this is the case with you, and you find yourself strapped for cash and wanting to get on a lower rate to help your cash flow issues, you're going to have to think about what you want to do regarding closing costs on your new loan. 

In case you weren't aware, all those fees you paid for your current mortgage, you're going to have to pay again on this new refinance loan.  Are you prepared to pay those fees? 

One thing to keep in mind is that not ALL the money needed to close a loan are real expenses.  For example, money for your tax escrow account is money that you need to pay one way or the other no matter what (remember, it's one of the two things in life you can't get out of; taxes.  The other one is death). 

So while you will need to have money available to create a new escrow account, you will get a refund of essentially that exact same amount of money from your existing account, so it's basically a wash.  The point is though, you'll need to have that money available when you come to the closing table.

One option that many people like to consider is rolling all expenses - fees (which are non-recurring expenses) as well as recurring expenses such as taxes and insurance - into the total amount of the loan.

This way you don't need to come to the table with any money at all, plus you'll still get that nice escrow refund in the mail in a few weeks.

While this was a very popular option in the past, it's not so easy to do these days.  The main reason is that the value of many homes have dropped so much that there just isn't enough equity remaining to be able to have that cushion to just 'roll stuff in'. 

In fact, many homeowners I know are currently unable to take advantage of a Dallas refinance at all simply because they are so upside down on their mortgage.  In other words, they owe considerably more on their mortgage than what an appraiser will assess their home to be worth.  This is a real problem.

So before you get too excited about jumping on the refi band-wagon, take some time to consider the costs and whether you'll be able to come up with that money up front, or whether you have enough equity in your home currently to allow it to be rolled in to the total amount of the mortgage.