Closing Costs

Closing Costs

REAL ESTATE

1

With mortgage rates near record lows, savvy homeowners are doing a bit of math aimed at solving this classic word problem: Does it make sense to refinance my loan?

Bankrate.com on Tuesday offered another data point that might nudge homeowners to a lender’s office: Mortgage closing costs in Florida just about match the national average. Fees on a $200,000 mortgage total $2,180 in Florida, a bit above the national norm of $2,128 but well below Hawaii’s $2,655 and New York’s $2,560.

Alas, the bottom line for Florida borrowers is complicated by the state’s unique tax structure. Bankrate’s survey looks at such standard expenses as appraisal fees, credit reports and loan origination fees. But it doesn’t include Florida’s documentary stamp tax or intangibles tax, two tolls that can sneak up on borrowers.

Because Florida doesn’t have a state income tax, the state imposes a documentary stamp tax collected on mortgages at a rate of 0.35 percent, plus an intangibles tax that costs an additional 0.2 percent. Together, they add $1,100 to the cost of borrowing $200,000.

Bankrate’s calculation also excludes title insurance, which can add hundreds of dollars more to your tab. That might not be enough of a hit to kill your refi, but they’re costs worth keeping in mind.

+My closing costs are how much? Florida ranks just above US average photo

Closing costs for homes in Florida rank just above national average. Photo by Andy Frame, courtesy of Brown Harris Stevens

In general, a refi makes sense if the savings from lower payments offset closing costs within two or three years, said Holden Lewis, Bankrate’s senior mortgage analyst.

“If it’s a period your comfortable with, go ahead and do it,” Lewis said.

Peggy Miller, residential lending adviser at Seaside National Bank & Trust in Boca Raton, offers a different rule of thumb: “If you’re going from a 30-year loan into another 30-year loan, you should drop your interest rate at least one full percent.”

Say you have a $200,000 mortgage at 5 percent interest. Your monthly principal and interest total $1,074. If you refinance into a loan with a 3.5 percent rate, your monthly payment will fall to $898, a savings of $176 a month.

Closing costs and state taxes will total $3,228, a sum you’ll make up in 18 months through your lower monthly payment.

Of course, your ability to refinance depends on a variety of factors, including your income and credit score, not to mention the amount of equity you’ve built since your last mortgage.

“There’s not a one-size-fits-all mortgage,” Miller said. “It’s a very complicated web that we weave in the mortgage industry.”

With rates on 15-year mortgages below 3 percent, many borrowers are trading their traditional 30-year loans for 15-year mortgages, Miller said. That move that brings a slightly higher monthly payment but significantly reduces the amount of interest a borrower pays over the life of the loan.

Mortgage rates, already low since the Great Recession, fell after this summer’s surprise move by British voters to leave the European Union. The average rate on a 30-year mortgage stood at a rock-bottom 3.43 percent last week, according to mortgage giant Freddie Mac. That’s a far cry from the double-digit mortgage rates common in the 1980s.

Normally, a dip in rates would spur a refinancing frenzy. But because rates have been so low for so long, few homeowners can take advantage. There were 37,175 mortgage refinancings in Florida during the first five months of 2016, down from 40,384 during the same period of 2015, according to the Federal Housing Finance Agency.

Where Florida ranks

The state is above the national average, but the Bankrate.com calculation doesn’t take into account Florida’s document stamp tax or its intangibles tax. (Bankrate.com’s analysis excludes state and local taxes in all locations.)

Rank. State: Closing costs

1. Hawaii: $2,655

2. New York: $2,560

17. Florida: $2,180

National average: $2,128

51. Pennsylvania: $1,837


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Phone: 561-951-3759
Dated: September 4th 2016
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