DEFINITION of 'Roll In'
A term which refers to including loan costs into the initial principal balance of a loan. This is a common practice by mortgage borrowers who do not have funds available, or who do not want to pay loan costs out of pocket. While most loan costs (lender fees) may be included into a mortgage balance, "prepaids" (ex. per diem interest) cannot.
"Roll in" is used interchangeably with "to roll" or "rolling". For example, a borrower could say "I'm broke, I want to roll in my loan costs into the loan balance", or "I'm broke, I want to roll my loan costs into the loan balance", or even "I'm broke, and I'm rolling my loan costs into the loan balance."
BREAKING DOWN 'Roll In'
To roll in costs into a mortgage balance is an opportunity-cost decision. For example, if the costs associated with refinancing a mortgage are $4,000, and the borrower has $4,000 available that they could use to pay those costs, the borrower should make the decision based on the economic (or utility) benefits and losses. By not using the $4,000 to pay loan costs, and instead rolling in the $4,000 into the loan balance, the borrower would have increased not only the total balance of the loan, but also the amount of interest that will be paid over the life of the mortgage. A thorough analysis should be completed before making these major decisions.