How to Save on Closing Costs for Your New Vacation Home

Posted by Team Donovan on Tuesday, April 19th, 2016 at 12:02pm.

Buying a second home in Orlando is a decision that requires careful study of your finances to make sure this investment is one you can truly afford. Once you’ve committed to the idea, and have enough funds on hand for a down payment, you can explore ways to save money on closing costs for your vacation home.

Closing costs are the final fees a buyer pays before completing the purchase of a property. These fees are paid to third parties that assist with the mortgage, such as the lender, as well as optional ones, such as mortgage discount points and fees that must be paid to others parties for title/escrow and insurance. There are two types of closing costs – recurring and non-recurring costs.

Recurring costs that need to be paid more than once include:

  • homeowner’s insurance
  • mortgage insurance
  • flood insurance
  • property taxes
  • insurance
  • HOA dues

Non-recurring closing costs (one-time fees) often include:

  • lender fees for underwriting
  • processing
  • loan origination
  • mortgage discount points
  • credit report fee
  • appraisal fee
  • home inspection fee
  • termite inspection fee
  • building record fees
  • title and escrow fees
  • document preparation fee
  • recording and wire fees
  • notary and messenger fees
  • transfer taxes.

The best way to save on closing costs is to simply pay for your Orlando vacation home with cash! If you’re a foreign investor, this will be a good option for you to consider, since it is more difficult for foreigners to quality for a U.S. mortgage.

If you do have to finance your home purchase, one of the most common ways to reduce your out-of-pocket expense is to get the seller to pay your closing costs. Be aware that the trade-off for getting the seller to pick up these fees is a potentially higher contract price for the property.

Another option for reducing the amount of closing costs you pay is to get a lender credit. This means that you agree to take on a higher mortgage rate in exchange for lower settlement costs. For example, instead of paying 4.25% interest rate and having to pay $5,000 in closing costs, your lender might charge you a 4.5% interest rate, and issue a $3,500 credit back to you.

You might be able to save on closing costs by scheduling the close of your purchase at the end of the month. That’s because during the period between the scheduled day of closing and the time you make your first mortgage payment, you will have to pay per diem interest. So you will have far less interest to pay if you schedule your closing for April 30th, for example.

Buying title insurance directly from a provider instead of using an agent is another way to save on closing costs. That’s because nearly 80 percent of the premium paid goes directly to the title agent’s commission. Experts say you can reduce your payment by over 35 percent when you buy directly from a title insurance provider.

Let the experts at Team Donovan help you negotiate the purchase of your Orlando vacation home. As independent agents, we can help you time the sale in a way that ensures you get the best possible deal. Contact us today at 407-705-7616 to learn how we can assist you in your real estate purchase.