What is this loan going to cost me? The interest rate is the most important factor that affects the cost of the loan. Generally, the higher the interest rate, the lower the fees. For example, it is possible to get a true No-Cost loan if you refinance into an interest rate that is a little higher than the Par Interest Rate. The Par Interest Rate is the interest rate that does not have any buy down points or lender credit.
Conversely, you can also refinance at an interest rate a little below the Par Interest Rate by paying “discount points” (also known as buy-down points). If you wish to refinance at the “Par Rate”, there is no discount fee and no lender credit.
In addition to closing costs, when you refinance a VA Loan, the new lender will set up a new escrow account. The lender will finance this new escrow account and roll it into your new loan. The old lender will send a refund check for any leftover balance left in the old escrow account. Also, the new lender will allow for deferring a mortgage payment (sometimes the timing allows for deferring 2 payments). The interest from deferring the payments are also rolled into the new loan amount.
The VA allows the lender / broker to charge the following closing costs:
Lender Underwriting Fees, which typically range from $550-$650
Title and Escrow Fees, which typically range from $700 - $1,500
VA Funding Fee, which is usually 0.5% of the new loan amount (Veterans with VA Disability Benefits are exempt from the VA Funding Fee.)
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