Your costs when you refinance home mortgage loans

Your Contract: This one is simple, but I would guess very few people do it.

READ THE ENTIRE CONTRACT.
It seems that usually the home mortgage refinancing contract is written with the preparer pointing out the obvious terms, i.e. sales price, earnest deposit, closing date, inspections, etc., but all of the language in the contract is binding; not just the part that your read and/or understand. Read it and if you don't understand it, seek legal counsel. This is the agreement for every part of the transaction. How taxes will be prorated, who pays for what, when do you agree to close the transaction and when will you be allowed to take possession of the property are all in your home mortgage refinancing contract.

If your purchase is new construction
there are often many specific clauses to your sale. Remember the builder probably sells many more houses than you buy and knows what language to include in his contract to protect and benefit him. Make sure this language is something you are willing to abide by.

There should be specific language in all contracts as to what amount will be used to prorate items, in particular property taxes. It is particularly important in new construction or areas that are being reappraised to understand how taxes will be prorated. If it states that the last available tax amount will be used you need to find out, before agreeing to it, that this amount was not based on a lesser value.

In new construction the property
was probably taxed on land value only or a partial value of the improvement. The tax bill that you will be responsible for will probably be based on a higher amount. If the Seller is giving you a credit for their part of the year that they owned the property before an actual tax amount can be ascertained, make sure that the best available information is being used to estimate the taxes. You also need to be aware that if you have an escrow account with your lender that they may set your monthly tax payment up on a lower amount than when your property is fully assessed. Be prepared to have your monthly payment increase when the higher tax bill is paid and your escrow account is analyzed. You many have a shortage that you'll want to pay all at once rather than have it included in your payment increase.

If your escrow account is already short
from a previous tax payment there will not only be an increase for the next year's tax bill, but an additional increase to cover the already existing shortage. Paying the shortage in one lump payment would eliminate this double increase. Your payment will still increase to the amount required to pay the next year's bill, but you won't also be making up for last year's shortage. This can be confusing so ask your home mortgage refinancing closer or loan-servicing department of your lender to explain your options.

If you're buying a property that was split
at the time of your sale (duplex, large parcel split into smaller ones, or some types of new construction) make sure that your property is assigned its own tax identification number before a tax bill is issued. You don't want to receive a tax bill that includes property other than the one that you own.

When you review your preliminary title commitment tax information should be included in the search. You can find out if the tax identification number included other property. This number is also what you will use if you need to contact the County for any other information regarding taxes.

No more guess work on what your costs will be. Understanding your home mortgage refinancing contract is essential!  Now that you know - Let them show you what they can do for you with a free quote. Apply for your home mortgage refinance with confidence!

Get a Second Mortgage - low as $4.00% apr

1000 Nationwide Lenders Match You with the Lowest Home Loan Rates