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Most people include closing and settlement costs into their refinance mortgage loans. Your decision to include or exclude these expenses depends on your reasons for the refinance and your future plans for the property or at least the new mortgage.
If you have set strict financial controls on yourself with a plan to reduce your monthly payment and/or accelerate the pay off of your mortgage loan, you might want to pay your closing costs to keep your mortgage balance as it was before the new loan. An equally important consideration is the subject of points and tax deductibility. This subject is often misunderstood by many and can cause tax issues.
If you are paying one or more points for your new mortgage, you can pay from your funds or include the cost in your refinance. If you want or need to deduct the cost of any points in the current tax year, you MUST pay this from your own funds. If you include the points in your refinance, you must deduct their cost over the life of your loan. Many people assume this cost is immediately deductible but it is not if included in the refinance.
Again, most people include all closing expenses and points in their refinance because it costs the borrower nothing from their current funds. It's easy and convenient. The only downside is that your mortgage loan balance will increase by the amount of your closing costs and points.