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What's with all the hidden refi costs?
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November 6, 2001: 1:36 p.m. ET
The ABCs of refinancing are tough, but there is room for negotiation.
By Walter Updegrave
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NEW YORK (CNNmoney) - In looking over a good faith estimate for refinancing my home I find I'm being charged numerous fees -- an underwriting fee, processing fee, wire transfer fee, sub-escrow fee, etc. What are these fees for and are they negotiable?
Isn't it always the way? You think you've got the deal of a lifetime, and then all of a sudden the bottom line doesn't look so pretty.
In this case, mortgage rates drop to their lowest level in years, raising your hopes of saving a few bucks by replacing your old loan with one carrying a rate of 6.5 percent or so. But it seems the lender is turning your big opportunity into a fee-for-all, hitting you up the wazoo for more expenses than you ever imagined could possibly be associated with one mortgage transaction.
Don't despair, though. If you play your cards right, you can still come out of this situation with a good deal.
Some things may be negotiable
The first thing to keep in mind is that in many cases you can negotiate with the lender. Your bargaining power largely depends on two things: how good a credit risk you are and how eager the lender is to make loans. If you've got a sterling credit report and a low level of debt, the lender may be eager to keep you as a customer, and thus more amenable to cutting a deal. Similarly, the more willing the lender is to make loans, the more negotiating power you'll have.
You want to start with the largest fees first, since that's where the lender likely has the most leeway. Typically, application fees, origination fees and commitment fees are among the highest, often running between $250 and $400.
You should know, however, that the lender may not have the power to negotiate all fees. For example, if you're working with a mortgage broker that deals with several banks, the mortgage banks may set some of the fees and no amount of haggling with the broker will lower them.
Remember too that there's no unanimity among lenders as to which fees are charged. Some lenders may charge an application fee, while others may not. But the ones that don't may charge an underwriting fee or document preparation fee instead. Some may let you off the hook for the cost of a home appraisal, but then make up for it by charging a processing fee.
Compare apples and apples
Fact is, whatever name these various fees go by, they are all essentially ways for the lender to pass on to you the various costs involved in making a loan. So don't worry so much about how many fees there are or what they're called. The more important thing is the total amount you're being charged -- and, of course, the interest rate you're paying.
So to be sure that you're not paying an amount well beyond what other lenders are charging in total fees, contact a few different lenders and ask for their fee schedules as well as the current rates on their loans. You may not be able to get a figure for every single charge you'll encounter at closing time, but you should get a good idea of the main fees you'll face and whether any lender's charges are out of line. 
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