How can I save on closing costs when buying a home?
For example: do I need a realtor, or can I do their job myself? In general in the United States the real estate agent fee is paid by the seller of the property. Their agent will be more than happy keep the entire fee if they don't have to split it with your agent.  If you don't have an agent you will be missing somebody who can help you find the property that meets your needs. They can also help explain what the different parts of the contract mean and give you advice regarding making an offer. Do I need to pay for an inspection, or am I likely to save enough   money from skipping it to cover potential problems that they would   have caught? Inspections are optional. Though the amount you are risking is the entire value of the purchase. If the property has a problem in the foundation, or the septic system, or the plumbing or electrical the cost to fix the issue could render the purchase not worth doing. If you discover the problem a year later and you have to repair the house and have to find temporary housing for a few months, you will regret skipping the inspection. What are some of the ways I can cut expenses on closing costs? Is   there any low-hanging fruit? You need to do your homework. When you are ready to purchase a property take good look at the good faith estimate and look at each item.  Ask them what the expense covers. Push back against those that seem optional or excessive. Keep in mind that moving the closing date from the end of a month to the start of the next month only changes the timing those charges, it doesn't really save you money. Rolling the costs into the loan sound easy but you have to think about. It means that you will be paying interest on those charges for the life of the loan. It is good that you are starting to think about all the costs. "According to Realtor.com, there are a variety of options to save on closing costs:  A general Google search on ""how to reduce closing costs"" will return a lot of results on other people's experiences, as well as tips and tricks." "As a buyer, one of the easiest ways to save on closing costs is to avoid title insurance.  This will only apply if you are a cash buyer, as a mortgage writer will typically require title insurance.   It is also one of the most ill-advised ways to save money.  You need title insurance.   For the most part, there is really no way to truly save on closing costs.  Wrapping costs into a loan, saving on interest or taxes through timing don't truly save money.  Sometimes you can obtain discounts on closing by using an targeted lender, but that may cost you in higher interest rates.   By paying points on your loan, you may increase your costs at closing in order to save money on interest paid.   Certainly you can't discount required, government imposed fees (like doc stamps).   You may be able to shop around and find a bit lower fees for appraisal, credit reports, title company fees, and title insurance.  However, that is a lot of work for not a lot of return.  Title companies seem to be pretty tight lipped about their fees.   The best yield of your time is to get the other party in the transaction to pay your costs.  The market or local tradition may not allow this.  An additional way to lower your costs is to ask the realtors involved to discount their commissions.  However, they could always say ""no"".   The bottom line is transacting real estate is very expensive." Good answers here. I would like to add one more (less obvious) way to save - look for houses that are For Sale By Owner (FSBO). Owner's who are selling without an agent do not have to pay a seller's agent fee. The closing cost savings here are actually on the seller's side of the transaction. However, since you know the seller is saving money, you may be able to negotiate a lower overall selling price with them (or it may be priced lower than comps already) because of this factor. FSBO houses maybe trickier to find than those listed by an agent, because they will not appear on the national MLS used by realtors to find/advertise houses that aren't being sold by their own clients. You may need to physically walk the streets of the neighborhood you're interested in moving to, to look for FSBO yard signs. FSBO sellers may also advertise in local newspapers. Do I need to pay for an inspection, or am I likely to save enough money from skipping it to cover potential problems that they would have caught?  A home inspection costs hundreds of dollars.  The average is $315.  Inspections regularly catch things that cost tens of thousands of dollars to fix, e.g. a new roof or a cracked foundation.   You also might find that a home inspection is required for your mortgage.   do I need a realtor, or can I do their job myself? Unless you are a licensed realtor or you buy directly from a seller without a realtor, the fee (charged to the seller) will be the same regardless of whether you have a realtor.  The seller's realtor will share the fee with your realtor if you have one.  So you can do the work yourself (perhaps not as well), but you won't save money by doing so.   If you have a lot of flexibility in when you purchase, you could look for especially cheap properties with motivated sellers.  Arrange financing ahead of time (before you find a house), so you can close quickly.  Some sellers will give you a discounted price to finish the sale quickly.  Even small savings on the price of a house will outweigh most savings on closing costs. Mostly ditto Pete B's answer. There's little you can do about closing costs. Some closing costs are government fees. There's nothing you can do about this. Sad and unfair as it is, taxes are not optional and not generally negotiable. Title insurance and fire insurance are required by the lender. Even if you're paying cash, you don't really want to skip on these. If your house burns down and you have no insurance ... well, if you're worried about saving a few hundred on your closing costs, I assume that losing $200,000 because your house burned down and you have no insurance would be a pretty bad thing. Title insurance protects you against the possibility that the seller doesn't really legally own the property, maybe a scam, more likely a mistake or a technicality. You can, and certainly should, shop around for a better deal on insurance. Last couple of housing transactions I made, title insurance was a one-time fee of around $200. (I'm sure this depends on the cost of the house, where you live, maybe other factors.) Maybe by shopping around I could have saved $10 or $20, but I doubt there's someone out there charging $50 when everyone else is charging $200. Fire insurance you're probably paying a couple of thousand a year, more opportunity for savings. Typically the buyer and the seller each have a realtor and they split the fee. If you go without a realtor but the seller hires one, she'll keep the entire fee. So the only way to avoid this expense is if neither of you has a realtor. I've never done that. Realtors cost a ton of money but they provide a useful service: not only helping you find a house but also knowing how to deal with all the paperwork. Plenty of people do it, though. I presume they get the title agency or the bank or somebody to help with the paperwork. There are also discount realtors out there who don't show your home, do little or nothing to market it, basically just help you with the paperwork, and then charge a very low fee. Timing closing for a certain day of the month can reduce what you owe at closing time -- by reducing the amount of interest you pay on the first month's loan payment -- but it doesn't save you any money. You'll make it up over the course of the loan. You might possibly save some money by timing closing around when property taxes are due. Theoretically this shouldn't matter: the theory is that they pro-rate property taxes between buyer and seller so each pays the taxes for the time when they own the house. So again, you might need less cash at closing but you'll make it up the next time property taxes are due. But the formulas the banks use on this are often goofy. Maybe if you live some place with high property taxes this is worth investigating. You could skip the inspection. But inspections I've had done generally cost about $500. If they found something that was a major issue, they might save you from buying a house that would cost tens of thousands in repairs. Or less dramatically, you can use the inspection report for leverage with the seller to get repairs done at the seller's expense. I once had an inspector report problems with the roof and so I negotiated with the seller that they would pay for a percentage of roof repair. I suppose if you're buying a house that you know is run down and will require major work, an inspection might be superfluous. Or if you know enough about construction that you can do an inspection yourself. Otherwise, it's like not buying insurance: sure, you save a little up front, but you're taking a huge risk. So what can you control? (a) Shop around for fire insurance. Maybe save hundreds of dollars. (b) Find a seller who's not using a realtor and then you don't use a realtor either. Save big bucks, 6 to 7% in my area, but you then have to figure out how to do all the paperwork yourself and you severely limit your buying options as most sellers DO use a realtor. Besides that, there's not much you can do.
Although it may be a little late for you, the real answer is this:  When you close on a mortgage for a primary residence you are affirming (in an affidavit), two intents: Now, these are affirming intentions — not guarantees; so if a homeowner has a change of circumstance, and cannot meet these affirmed intentions, there is almost always no penalty.  Frankly, the mortgage holder's primary concern is you make payments on time, and they likely won't bother with any inquiry.   That being said, should a homeowner have a pattern of buying primary residences, and in less than 1 year converting that primary to a rental, and purchasing a new primary; there will likely be a grounds for prosecution for mortgage fraud. In your specific situation, you cannot legally sign the owner-occupancy affidavit with the intention of not staying for 1 year.  A solution would be to purchase the condo as a second home, or investment; both of which you can still typically get 80% financing.  A second home is tricky, I would ask your lender what their requirements are for 2nd home classification.   Outside that, you could buy the condo as a primary, stay in it for a year, then convert.  If you absolutely had to purchase the 2nd property before 1 year, you could buy it as a primary with a 2 month rent back once you reach 10 months.  Should you need it earlier, just buy the 2nd house as an investment, then once you move in, refinance it as a primary. This last strategy requires some planning ahead and you should explain your intention to the loan officer ahead of time so they can properly price the non-owner occupied loan. I recognize you are probably somewhere in the middle of various steps here... but I'd start and go through one-by-one in a disciplined way. That helps to cut through the overwhelming torrent of information that's out there. Here is my start at a general checklist: others can feel free to edit it or add their input. How 'much' house would you like to buy in terms of $$$ and bedrooms/sq ft. You can start pretty general here, but the idea is to figure out if you can actually afford a brand new 4bd/3ba 2,500 sq ft house (upwards of $500K in your neck of the woods according to trulia.com). Or maybe with your current resources you'll be looking at something like a townhome that is more entry-level but still yours. Some might recommend that this is a good time to talk to any significant others/whomevers and understand/manage expectations. My wife usually cares a lot about schools at this stage, but I think it's too early. Just ballpark whether you're looking at a $500K house, a $300K house, or a $200K townhome.  How much house can you afford in terms of monthly payments only... (not considering other costs like utilities yet). Looking around at calculators like this one from bankrate.com can help you figure this out. Set the interest rate @ 5%, 30-year loan, and change the 'mortgage amount' until you have something that is about 80%-90% of what you currently pay in rent each month. I'll get to 'why' to undershoot your rent payment later.  Crap... can't afford my dream house... If you don't have the down payment to make the numbers work (remember that this doesn't even include closing costs yet), there are other loan options like FHA loans that can go as low as about 5% down payment. The math would be the same but you replace 0.8 with 0.95.  Then, look at your personal budget. Come up with general estimates of what you currently bring in and spend each month overall. Just ballpark it...  Next, figure what you currently spend towards housing in particular. Whether you are paying for it or your landlord is paying for it, someone pays for a lot of different things for housing. For now, my list would include (1) Rent, (2) Mortgage Payment, (3) Electricity, (4) Gas, (5) Sewer, (6) Water, (7) Trash, (8) Other utilities... TV/Internet/Phone, (9) Property Insurance, (10) Renter's Insurance, and (11) Property Taxes.  I would put it into a table in Excel somewhere that has 3 columns... The first has the labels, the second will have what you spend now, and the third will have what you might spend on each one as a homeowner. If you pay it now, put it in the second column. If your landlord pays it right now, leave it out as that's included in your rent payment. Obviously each cell won't be filled in. Fill in the rest of the third column. You won't pay rent anymore, but you will have a mortgage payment. You probably have a good estimate of any electricity bills, etc that you currently pay, but those may be slightly higher in a house vs. a condo or an apartment. As for things like sewer, water, trash or other 'community' utilities, my bet would be that your landlord pays for those. If you need a good estimate ask around with some co-workers or friends that own their own places. They would also be a good resource for property insurance estimates... shooting from the hip I would say about $100/month based on this website. (I'm not affiliated).  The real 'ouch' is going to be property tax rates. Based on the data from this website, your county is about 9% of property value. So add that into the third column as well.  Can you really afford a house? round 2 Now... add up the third column and see how that monthly expense amount on housing compares against your current monthly budget. If it's over, you don't have to give up, but you should just understand how much your decision to purchase a house will strain your budget. Also, you should use this information to look again at 'how much house can you afford.'  Now, do some more research. If you need to get a revised loan amount based on the FHA loan decision, then use the bankrate calculator to find out what the monthly payment is for a 95% loan against your target price. But remember that an FHA loan will also carry PMI that is extra on top of your monthly payment. Or, if you need to revise your mortgage payment downwards (or upwards) change the loan amount accordingly.  Once you've got the numbers set, look for properties that fit. This way you can have a meaningful discussion with yourself or other stakeholders about what you can afford. As far as arranging financing... a realtor will be able and willing to point you in the right direction for obtaining funding, etc. And at that point you can just check anything you're offered by shopping interest rates, etc against what the internet has to say.  Feel free to ask us, too... it's hard to give much better direction without more specifics. "First off; I don't know of the nature of the interpersonal relationship between you and your roommate, and I don't really care, but I will say that your use of that term was a red flag to me, and it will be so to a bank; buying a home is a big deal that you normally do not undertake with just a ""friend"" or ""roommate"". ""Spouses"", ""business partners"", ""domestic partners"" etc are the types of people that go in together on a home purchase, not ""roommates"". Going ""halvsies"" on a house is not something that's easily contracted; you can't take out two primary mortgages for half the house's value each, because you can't split the house in half, so if one of you defaults that bank takes the house leaving both the other person and their bank in the lurch. Co-signing on one mortgage is possible but then you tie your credit histories together; if one of you can't make their half of the mortgage, both of you can be pursued for the full amount and both of you will see your credit tank. That's not as big a problem for two people joined in some other way (marriage/family ties) but for two ""friends"" there's just way too much risk involved. Second, I don't know what it's like in your market, but when I was buying my first house I learned very quickly that extended haggling is not really tolerated in the housing market. You're not bidding on some trade good the guy bought wholesale for fifty cents and is charging you $10 for; the seller MIGHT be breaking even on this thing. An offer that comes in low is more likely to be rejected outright as frivolous than to be countered. It's a fine line; if you offer a few hundred less than list the seller will think you're nitpicking and stay firm, while if you offer significantly less, the seller may be unable to accept that price because it means he no longer has the cash to close on his new home. REOs and bank-owned properties are often sold at a concrete asking price; the bank will not even respond to anything less, and usually will not even agree to eat closing costs. Even if it's for sale by owner, the owner may be in trouble on their own mortgage, and if they agree to a short sale and the bank gets wind (it's trivial to match a list of distressed mortgaged properties with the MLS listings), the bank can swoop in, foreclose the mortgage, take the property and kill the deal (they're the primary lienholder; you don't ""own"" your house until it's paid for), and then everybody loses. Third, housing prices in this economy, depending on market, are pretty depressed and have been for years; if you're selling right now, you are almost certainly losing thousands of dollars in cash and/or equity. Despite that, sellers, in listing their home, must offer an attractive price for the market, and so they are in the unenviable position of pricing based on what they can afford to lose. That again often means that even a seller who isn't a bank and isn't in mortgage trouble may still be losing thousands on the deal and is firm on the asking price to staunch the bleeding. Your agent can see the signs of a seller backed against a wall, and again in order for your offer to be considered in such a situation it has to be damn close to list. As far as your agent trying to talk you into offering the asking price, there's honestly not much in it for him to tell you to bid higher vs lower. A $10,000 change in price (which can easily make or break a deal) is only worth $300 to him either way. There is, on the other hand, a huge incentive for him to close the deal at any price that's in the ballpark: whether it's $365k or $375k, he's taking home around $11k in commission, so he's going to recommend an offer that will be seriously considered (from the previous points, that's going to be the asking price right now). The agent's exact motivations for advising you to offer list depend on the exact circumstances, typically centering around the time the house has been on the market and the offer history, which he has access to via his fellow agents and the MLS. The house may have just had a price drop that brings it below comparables, meaning the asking price is a great deal and will attract other offers, meaning you need to move fast. The house may have been offered on at a lower price which the seller is considering (not accepted not rejected), meaning an offer at list price will get you the house, again if you move fast. Or, the house may have been on the market for a while without a price drop, meaning the seller can go no lower but is desperate, again meaning an offer at list will get you the house. Here's a tip: virtually all offers include a ""buyer's option"". For a negotiated price (typically very small, like $100), from the moment the offer is accepted until a particular time thereafter (one week, two weeks, etc) you can say no at any time, for any reason. During this time period, you get a home inspection, and have a guy you trust look at the bones of the house, check the basic systems, and look for things that are wrong that will be expensive to fix. Never make an offer without this option written in. If your agent says to forego the option, fire him. If the seller wants you to strike the option clause, refuse, and that should be a HUGE red flag that you should rescind the offer entirely; the seller is likely trying to get rid of a house with serious issues and doesn't want a competent inspector telling you to lace up your running shoes. Another tip: depending on the pricepoint, the seller may be expecting to pay closing costs. Those are traditionally the buyer's responsibility along with the buyer's agent commission, but in the current economy, in the pricepoint for your market that attracts ""first-time homebuyers"", sellers are virtually expected to pay both of those buyer costs, because they're attracting buyers who can just barely scrape the down payment together. $375k in my home region (DFW) is a bit high to expect such a concession for that reason (usually those types of offers come in for homes at around the $100-$150k range here), but in the overall market conditions, you have a good chance of getting the seller to accept that concession if you pay list. But, that is usually an offer made up front, not a weapon kept in reserve, so I would have expected your agent to recommend that combined offer up front; list price and seller pays closing. If you offer at list you don't expect a counter, so you wouldn't keep closing costs as a card to play in that situation." To get the factors you want, start with a complete amortization calculator and a tax deduction calculator, filling in values for your down payment, purchase price, tax rates, and mortgage rate.  If you are talking about a specific property, you should be able to get taxes for the current year, and perhaps using historical values estimate taxes going out.  Some calculators will include PMI (which you should avoid like the plague in an actual purchase).  Given some preliminary data, you can calculate your insurance. So once you have your PITI (principal, interest, tax, and insurance) monthly payment and tax deduction, you can calculate how much you spend a month on the house minus the deduction. To estimate maintenance costs, you could either figure out about what you'd need to replace in the given time you plan to stay put and use a rough estimate on what it is.  You can also use some rough estimates like this (1% of the property value yearly!) or this (moving the number up to a whopping 2%). Don't forget closing costs as a buyer and seller.  You can find estimates for these as well, and they are a function of the purchase price (usually around 2%). So to figure out how much it costs you to live in a house for X months, you can do So your total cost is Total Return Is: You can adjust that total return for inflation using this calculator to get your total return adjusted for inflation.  If projecting into the future, you can try a formula found here. To figure out the return on your investment, use So to figure out the total return adjusted you need for a given ROI, find "Here are some important things to think about.  Alan and Denise Fields discuss them in more detail in Your New House. Permanent work.  Where do you want to live?  Are there suitable jobs nearby?  How much do they pay? Emergency fund.  Banks care that you have ""reserves"" (and/or an unsecured line of credit) in case you have a run of bad luck.  This also helps with float the large expenses when closing a loan. Personal line of credit. Who are you building for?  If you are not married, then you should consider whether building a home makes that easier, or harder.  If you hope to have kids, you should consider whether your home will make it easier to have kids, or harder.  If you are married (or seriously considering it), make sure that your spouse helps with the shopping, and is in agreement on the priorities and choices.  If you are not married, then what will you do if/when you get married?  Will you sell?  expand?  build another house on the same lot?  rent the home out? Total budget.  How much can the lot, utilities, permits, taxes, financing charges, building costs, and contingency allowance come to?  Talk with a banker about how much you can afford.  Talk with a build-on-your-lot builder about how much house you can get for that budget.  Consider a new mobile or manufactured home.  But if you do choose one, ask your banker how that affects what you can borrow, and how it affects your rates and terms.  Talk with a good real estate agent about how much the resale value might be. Finished lot budget. How much can you budget for the lot, utilities, permits required to get zoning approval, fees, interest, and taxes before you start construction? Down payment.  It sounds like you have a plan for this. Loan underwriting.  Talk with a good bank loan officer about what their expectations are.  Ask about the ""front-end"" and ""back-end"" Debt-To-Income ratios.  In Oregon, I recommend Washington Federal for lot loans and construction loans.  They keep all of their loans, and service the loans themselves.  They use appraisers who are specially trained in evaluating new home construction.  Their appraisers tend to appraise a bit low, but not ridiculously low like the incompetent appraisers used by some other banks in the area.  (I know two banks with lots of Oregon branches that use an appraiser who ignores 40% of the finished, heated area of some to-be-built homes.)  Avoid any institution (including USAA and NavyFed) that outsources their lending to PHH. Lot loan.  In Oregon, Washington Federal offers lot loans with 30% down payments, 20-year amortization, and one point, on approved credit.  The interest rate can be a fixed rate, but is typically a few percentage points per year higher than for a mortgage secured by a permanent house.  If you have the financial wherewithal to start building within two years, Washington Federal also offers short-term lot loans.  Ask about the costs of appraisals, points, and recording fees. Rent.  How much will it cost to rent a place to live, between when you move back to Oregon, and when your new home is ready to move into? Commute.  How much time will it take to get from your new home to work?  How much will it cost?  (E.g., car ownership, depreciation, maintenance, insurance, taxes, fuel?  If public transportation is an option, how much will it cost?) Lot availability.  How many are there to choose from?  Can you talk a farmer into selling off a chunk of land?  Can you homestead government land?  How much does a lot cost?  Is it worth getting a double lot (or an extra large lot)? Utilities. Do you want to live off the grid?  Are you willing to make the choices needed to do that?  (E.g., well, generator, septic system, satellite TV and telephony, fuel storage)  If not, how much will it cost to connect to such systems?  (For practical purposes, subtract twice the value of these installation costs from the cost of a finished lot, when comparing lot deals.) Easements. These provide access to your property, access for others through your property, and affect your rights.  Utility companies often ask for far more rights than they need.  Until you sign on the dotted line, you can negotiate them down to just what they need.  Talk to a good real estate attorney. Zoning. How much will you be allowed to build?  (In terms of home square footage, garage square footage, roof area, and impermeable surfaces.)  How can the home be used?  (As a business, as a farm, how many unrelated people can live there, etc.)  What setbacks are required?  How tall can the building(s) be?  Are there setbacks from streams, swamps, ponds, wetlands, or steep slopes? Choosing a builder.  For construction loans, banks want builders who will build what is agreed upon, in a timely fashion.  If you want to build your own house, talk to your loan officer about what the bank expects in a builder. Plansets and permits.  The construction loan process. If you hire a general contractor, and if you have difficulties with the contractor, you might be forced to refuse to accept some work as being complete.  A good bank will back you up.  Ask about points, appraisal charges, and inspection fees. Insurance during construction.  Some companies have good plans -- if the construction takes 12 months or less.  Some (but not all) auto insurance companies also offer good homeowners' insurance for homes under construction.  Choose your auto insurance company accordingly. Property taxes. Don't forget to include them in your post-construction budget. Homeowners' insurance.  Avoid properties that need flood insurance.  Apply a sanity check to flood maps -- some of them are unrealistic.  Strongly consider earthquake insurance.  Don't forget to include these costs in your post-construction budget. Energy costs.  Some jurisdictions require you to calculate how large a heating system you need.  Do not trust their design temperatures -- they may not allow for enough heating during a cold snap, especially if you have a heat pump.  (Some heat pumps work at -10°F -- but most lose their effectiveness between 10°F and 25°F.)  You can use these calculations, in combination with the number of ""heating degree days"" and ""cooling degree days"" at your site, to accurately estimate your energy bills.  If you choose a mobile or manufactured home, calculate how much extra its energy bills will be. Home design.  Here are some good sources of ideas: A Pattern Language, by Christopher Alexander.  Alexander emphasizes building homes and neighborhoods that can grow, and that have niches within niches within niches. The Not-So-Big House, by Sarah Susanka.  This book applies many Alexander's design patterns to medium and large new houses. Before the Architect.  The late Ralph Pressel emphasized the importance of plywood sheathing, flashing, pocket doors, wide hallways, wide stairways, attic trusses, and open-truss or I-joist floor systems.  Lots of outlets and incandescent lighting are good too.  (It is possible to have too much detail in a house plan, and too much room in a house.  For examples, see any of his plans.) Tim Garrison, ""the builder's engineer"".  Since Oregon is in earthquake country -- and the building codes do not fully reflect that risk -- emphasize that you want a building that would meet San Jose, California's earthquake code." To answer your question, you need to ask yourself  Common transaction costs can be really hard to compensate in a single year. It can include house inspections, closing costs, agents commissions, etc---all together, it can be up to 6-10% of the value of your house. This is a difficult goal to beat in a year, and your margin for miscalculations and market fluctuations is very low. In brief, you can be screwed big time. To make a profit in a year, you need to reduce transaction costs to the minimum: Avoid agents, inspectors, mortgage brokers, etc, which can pay you back with an interesting surprise. Bottom line, it can make sense to buy a house for a year, only if you can reduce all the related transaction costs by doing them yourself. If there are many houses in the market for sale, I would try to convince someone to lease the house for a year in the best terms possible (and maybe even try to sub-lease some of the rooms), or also rent-to-own the house. That way you avoid the transaction costs upfront, and would make more financial sense for a non real estate guru. The typical process is to look at the savings and see how many months it will take to break even on the closing costs. Since you've stated there are no costs, even 1/8% drop in rates is going to save you money. A savings of over 1.5% even on a sub 100K loan is nothing to ignore. You first year interest savings will exceed $1200. How many hours does it take you to earn that much money? (this is a rhetorical question, if that wasn't obvious) It would help if we had numbers to walk you through the analysis. Current balance, rate, remaining term, and the new mortgage details.  To echo and elaborate on part of Ben's response, the most important thing is to not confuse cash flow with savings. If you have 15 years to go, and refinance to 30 years, at the rate rate, your payment drops by 1/3. Yet your rate is identical in this example.  The correct method is to take the new rate, plug it into a mortgage calculator or spreadsheet using the remaining months on the current mortgage, and see the change in payment. This savings is what you should divide into closing costs to calculate the breakeven. It's up to you whether to adjust your payments to keep the term the same after you close.  With respect to keshlam, rules of thumb often fail. There are mortgages that build the closing costs into the rate. Not the amount loaned, the rate. This means that as rates dropped, moving from 5.25% to 5% made sense even though with closing costs there were 4.5% mortgages out there. Because rates were still falling, and I finally moved to a 3.5% loan. At the time I was serial refinancing, the bank said I could return to them after a year if rates were still lower. In my opinion, we are at a bottom, and the biggest question you need to answer is whether you'll remain in the house past your own breakeven time. Last - with personal finance focusing on personal, the analysis shouldn't ignore the rest of your balance sheet. Say you are paying $1500/mo with 15 years to go. Your budget is tight enough that you've chosen not to deposit to your 401(k). (assuming you are in the US or country with pretax retirement account options) In this case, holding rates constant, a shift to 30 years frees up about $500/mo. In a matched 401(k), your $6000/yr is doubled to $12K/year.  Of course, if the money would just go in the market unmatched, members here would correctly admonish me for suggesting a dangerous game, in effect borrowing via mortgage to invest in the market. The matched funds, however are tough to argue against. You are saving around 2.41% over the Car Loan for a duration of 35 months. Check out if the fees for redrawing on home loan and fees for closing the matches the money saved. Edit: If you are making your current car payments as additional monthy payments to your mortgage then you are in effect paying less interest than current car loan. In the US you can get a home warranty when you buy a house that will cover major repairs for the first few years of owning a home.  The costs vary based on age and the results of the home inspection.  Ours cost ~$250 a year.  This was put into our closing costs.  Unfortunately this market does have some disreputable companies that come im with prices that seem too good to be true.  As is usually the case they are.  Do research on the company you are getting the home warrenty from to make sure you are dealing with a reputable company that will honor its commitments. By having 20% down you will avoid needing Mortgage insurance which will save you a considerable amout.  My PMI cost me about $70 a month. However once you get to 20% equity in your home the pmi drops off.  So if you can put down 15% you should be able to get out from under your pmi in a few years if you want to keep that 5% cushion while making extra payments. The question is how much do you feel you need.  So far owning a 70 year old home my extra maintence costs have been around 2500 a year.  But they seem to be in 1k chunks every 4 or 5 months. First of all, congratulations on your home purchase.  The more equity you build in your house, the more of the sale price you get out of it when you move to your next house.  This will enable you to consume more house in the future.  Think of it as making early payments towards your next down payment. Another option is to save up a chunk of money and recast your mortgage, paying down the principal and having the resulting amount re-amortized to provide you with a lower monthly payment.  You may be able to do this at least once during your time in the house, and if you do it early enough it can potentially help your savings in other areas. On the other hand, it is possible given today's low interest rates for mortgages that in other forms of investments (such as index funds) you could make more on the money you'd be putting towards your extra payments.  Then you would have more money in savings when you go to sell this house and buy the next one that you would in equity if you didn't go that route.  This is riskier than building equity in your home, but potentially has a bigger pay-off. You do the trade-offs. Save up a bigger downpayment.  The lender's requirement is going to be based on how much you finance, not the price of the house. An addition to the other answers more than a real answer I suspect. Note that fees are not the only way that you pay for foreign exchange; where no foreign exchange fee is charged the issuer makes it back by giving an appalling spread on the rate. Be very careful not to go for a card that has no fees but an exorbitant spread. I personally would open a CAD denominated account in Canada and convert a larger amount into that account when CAD is historically weak. The spreads will be better that way but don't attempt to use it to mitigate exchange rate risk or to trade the two currencies for profit as that way madness and penury lie. Tim Ferris has some pretty good finance related episodes with hedge fund managers or personal finance authors (for e.g. the one with Ray Dalio or Tony Robbins).  They are not exclusively finance related but include some pretty in-depth conversations.  20-Minute VC is also great if you're interested in Venture Capital.