Is it Possible to Roll Closing Costs into Your Mortgage?
Depending on the type of new home loan, you typically cannot roll closing costs into your mortgage. However, there are ways to reduce your up-front cost when purchasing a house, like reducing your downpayment. However, it’s important to remember that a lower downpayment increases your overall loan amount, which affects your Loan-to-Value Ratio (LTV Ratio). If your LTV Ratio is higher than 80% you’ll typically be required to have mortgage insurance.
Rolling Closing Costs into a Home Refinance
On the other hand, it is usually possible to roll closing costs into a refinance loan, as long as the final loan amount is not higher than the 80% threshold for the LTV Ratio. For example, if you are refinancing a home that is worth $300,000, the maximum loan amount will likely be $240,000. It’s possible to include closing costs in that final amount, but should you? It’s important to consider that by including closing costs in your loan, you will be paying interest on that amount over the life of your loan.