Closing costs of refinance mortgage often influence a borrower`s decision to opt for refinance mortgage, or continue with an existing mortgage. Refinance mortgage is also a mortgage loan, like the first time mortgage. Mortgage loans are long-term loans. The amounts involved are substantial. In consideration for the mortgage loan, the borrower executes a mortgage instrument through which lender gets rights to sell the mortgaged real estate property in the event the borrower fails to adhere to the terms and conditions in the mortgage instrument.

Mortgage loans, including refinance mortgages, are repayable in equated monthly installments spread over long periods, extending at times to almost 30 years. Each EMI is made of some principal, and some interest. But the overall EMI amount remains steady throughout the term of the loan. The interest component is allowed as deduction against income of the year while computing tax for the year. If this advantage is taken into account, the rate of interest quoted on the mortgage stands reduced quite a bit. Another advantage of mortgage and refinance mortgage loans is that since there is no variation in the installment, it becomes easier to repay the loans with each passing year as incomes increase in the interim period. The value of EMIs also becomes negligible over the period due to inflation. Effectively, the borrower is paying out much lower value towards the end of the loan, and is left with an asset of great value for it. Without mortgage loans, the borrower may not have managed to purchase such an asset.

Borrowers opt for refinance mortgage when the asset underlying the mortgage increases considerably in value within the term of the mortgage. At such time, the borrower first approaches the existing lender, for better terms, which may be to lower the equated monthly installments by increasing term, lower the interest and thereby lower the EMI, and/or asks for additional loan. The lender may or may not agree to offer any terms favorable to the borrower. This forces the borrower to look elsewhere in the market. While looking for refinance loans, the borrower must identify how much it will cost him. Good Faith Estimate is one important document that can give borrower an idea about how much amount will be required for closing refinance. The first lender also plays spoilsport by levying additional penalties for premature closing of the loan so that the reliable borrower reviews the stand. When any real estate property as offered as security, the lender does a thorough investigation of title of the property. And the credit score of the borrower also becomes pertinent. Such investigations and measures cost money, Through the Good Faith Estimate, the borrower becomes aware of duplications if any.

By availing additional funds, the borrower can use it for down payment for another real estate property. Alternately, the borrower may choose to clear excessive indebtedness. Most of the short-term debts, including consumer loans, and personal loans, are obtained without providing any real estate security. Because of this inherent risk, lenders charge much higher interest rates on these types of loans. Even if they do not charge higher interest, they try to recover their principal at the earliest because of which installments on short-term loans are much higher than those on mortgage loans. This makes it difficult for the borrower to manage such debts. If the same debt can be spread over longer period, and EMI is reduced then it becomes easier for the borrower to repay the loans, without any risk to credit score. Therefore, obtaining mortgage loan through refinance mortgage is often used for debt consolidations.