Your costs when you refinance home mortgage loans

Truth in Lending

This is the form that often confuses everyone. It will disclose annual percentage rate (APR) among other figures. The APR is normally not the rate on the note and not the rate that payments are figured on.

Certain charges from the settlement statement
that must be shown as if they were financed as part of your rate on an annual basis. This is the APR, also known as truth in lending.

Escrows for tax and insurance
Some lenders require and/or some borrowers request that an escrow account be established for payment of the property taxes and homeowner's insurance. Some lenders allow you to pay your own taxes and insurance but often there will be an additional charge or increase in interest rate to do this. If an account is established, funds will be collected at time of closing to insure that there is a sufficient amount to pay future bills for tax and insurance. The first payment date as well as due date of the bill will determine how much is collected at closing.

Lenders are required to provide an escrow account disclosure
to make sure that based on the anticipated payments they will not have an excess amount over what is allowed at the end of the first year. There will be a form covering the first year showing the amount of each monthly payment going in to the escrow account and anticipated payments coming out of it.

Lenders are only allowed to keep so much
Usually 2 months of a cushion in the account. Anything over this amount will be credited on your settlement statement as an "aggregate adjustment."

Each year
Your lender's loan service department will analyze your escrow account and based on previous disbursements determine that there is never an excess amount in the account over the cushion. If the amount paid for taxes and/or insurance has increased from the previous year your monthly payment will be adjust accordingly.

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