Do you want to refinance your mortgage into a lower rate?
Before you do, make sure you know the true cost of refinancing.
There are fees and closing costs to consider.
In this article we’re going to answer the question. How much does it cost to refinance.
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Is Refinancing Worth it?
This is a common question many homeowners have when thinking about refinancing a mortgage. Refinancing requires a lot of paperwork, it’s almost as complicated as when you got the mortgage to begin with.
So before you waste your precious time dealing with the hassle of getting a loan you want to make sure it’s truly worth it.
In order for a refinance to be worth your time will largely depend on the amount of closing costs involved and the rate. The interest rate is extremely import and one of the most common reasons for refinancing. A quarter of one percentage difference in rate can save, or cost, you tens of thousands of dollars.
Average Cost to Refinance a Mortgage
As an example let’s say your mortgage has a balance of $200,000. If you were to refinance that loan into a new loan, total closing costs will run between 2%-4% of the loan amount. You can expect to pay between $4,000 to $8,000 to refinance this loan.
A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually pay charging a slightly higher interest rate so they can make the money back.
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How to Lower the Costs of Refinancing
Negotiate with Your Lender
Not all of the closing costs are fixed, you may be able to negotiate some of the fees with your lender. See if you’re able to use a previous home appraisal or are able to choose some of the vendors used for the title or home inspection.
Get Offers from Multiple Lenders
Closing costs and other fees will vary lender to lender. It’s best to compare loan estimates from at least 3 different lenders. You can even use those loan estimates to help you negotiate an even better deal.
Use our loan comparison calculator to compare loan offers to see which is the best deal.
Improve Your Credit Score
A higher credit score will not only equal a lower credit score, but you will be offered a better deal with lower refinance costs.
The easiest and quickest way to increase your credit score on a time crunch is by paying down your credit card debt. Try to lower your credit card balances to less than 15% of the credit limit to maximize your FICO score before applying.
Available Types of Refinance Programs
You can use the built up equity in your home to get cash using a cash-out refinance. A cash-out refinance is a new loan for the amount of your mortgage plus up to 80% of the loan-to-value ratio that you would receive as cash. The new loan will have a single loan payment.
Home Equity Loan
A home equity loan is similar to a cash-out refinance because you are using your home equity as collateral for a loan. A home equity loan is a separate loan, also called a second mortgage. You can borrow up to 80% of the lTV ratio with home equity loans, or HELOC.
Rate and Term Refinance
A rate and term refinance is your typical mortgage refinance where you are doing so to take advantage of the low interest rates and get a new loan term. Refinancing will lower your mortgage rate and your monthly mortgage payment.
A streamline refinance is available for home loans that are backed by the Government, such as FHA loans. As the name suggest the refinance process is streamlined making it quick and easy.
FHA streamline refinance loans allow homeowners with FHA loans to refinance their loan to get a lower interest rate without tons of paperwork.
The Lenders Network has the largest network of mortgage lenders that specialize in home loans for borrowers with all types of credit scores. We will match you will the best lender based on your specific situation.