Mortgage Principal Issues - The Bills.com Blog

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Mortgage Principal Issues

Question: Hi. I just refinanced. I have 2/28 mortgage and I don't have prepayment penalty. Why is my pay off more than the original principal $134,235 change to $137,771.

Answer: I cannot be sure of an answer without more information, but I will make my best guess. If your original mortgage was $134,235, and you decided to refinance in a short period of time, your mortgage balance has likely notfallen very much. In the early years of a mortgage, most of your payment is going towards interest not principal. It is likely that in 12 months, your mortgage balance reduced by less than $2,000. But wait, how come your new mortgage balance is $3,000 more than the original balance, not $2,000 less? This is most likely due to the fees and

closing costs associated with refinancing your mortgage. Every time you refinance your mortgage, there are fees involved.

You can find the details of these fees on the HUD disclosure statement. They may include an origination fee, an appraisal fee, a processing fee, an application fee, a discount fee (if you "bought down" the rate). It

would not be unusual to see all of these fees add up to several thousand dollars.

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