How Much Does It Cost To Refinance Your Mortgage?

How Much Does It Cost To Refinance

Do you want to refinance your mortgage to a lower rate?

Before you do, make sure you know the true cost of refinancing your home loan. There are fees and closing costs to consider.

In this article, we’re going to go over all the costs associated with refinancing so you can make sure it will benefit you.

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How Much Does it Cost to Refinance

According to the Freddie Mac the average closing costs paid when refinancing a home is $5,000. Your loan amount There are closing costs associated with refinancing your mortgage and can be as high as getting a new loan. On average, closing costs amount to 2% to 5% of the loan amount.

The interest rate is critical and one of the most common reasons for refinancing. A quarter of one percent difference in the interest rate can save, or cost you tens of thousands of dollars.

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Average Cost to Refinance a Mortgage

Closing costs on mortgage refinance loans on average are between 3% to 6% of the loan amount. According to a data from ClosingCorp, the average home’s closing costs is $5,749.

No Closing Cost Refinance

no closing cost refinance is when the lender waives the closing costs, so there are no upfront costs to the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage, such as a higher interest rate to make up for the lost revenue.

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How to Lower your Refinance Costs

Negotiate with Your Lender – You may be able to negotiate some of the fees with your lender. A mortgage lender has three days from the time they receive your loan application to provide the loan estimate breaking down the interest rate and fees of the loan.

Shop Offers with Multiple Lenders – Closing costs and other fees will vary from lender to lender. It’s best to compare loan estimates from at least three different lenders. You can even use those loan estimates to help you negotiate an even better deal with your current lender.

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. Check your credit report for errors, if you find anything you don’t believe is yours you can dispute with the credit bureaus.

More tips for raising your credit score

Available Types of Refinance Programs

Cash-out Refinance

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

home equity loan is similar to a cash-out refinance because you use 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 HELOCs.

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.

Streamline Refinance

A streamlined refinance is available for home loans backed by the Government, such as FHA loans. As the name suggests, the refinance process is streamlined, requiring little paperwork. 

FHA streamline refinance loans allow homeowners with FHA loans to refinance their mortgage to a lower rate without tons of paperwork.

Common Mortgage Refinance Costs

Refinancing your mortgage can be a costly process. Closing costs are fees charged by lenders for funding the loan. Closing costs can range from 1%-5% of the loan amount. These closing costs can typically be rolled into the mortgage loan.

  • Loan Application Fee ($75-$300)When you refinance your mortgage, you’re getting an entirely new mortgage. Some lenders may waive this fee, or you can negotiate to have the fee reduced or waived altogether.
  • Loan Origination Fee (up to 1.5% of the loan amount)Loan origination fees are how mortgage companies compensate the loan officer working on your application. Origination fees are between 1%-2%.
  • Home Appraisal Fee ($300-$600)A home appraisal is a professional estimate of a property’s market value. In most cases, lenders will require a new appraisal to be performed on your home to determine its value.
  • Recording Fee ($25-$250)Recording fees are assessed to have the refinancing part of the public record. They are determined by the government organizations in each state or community. 
  • Flood Certification Fee ($50-$150)Homeowners of property located in a federally designated flood zone may be required to add flood or life of loan insurance coverage. 
  • Home Inspection Fee ($300-$500)A home inspection is not always required, but in some cases, a lender may need it. The inspection is performed to check the property for any potential issues—the average home inspection costs between $300-$500.
  • Title Search Fee ($150-$300) – The title company will need to perform a search to ensure the seller has the legal right to sell the home. The title is often called a deed.
  • Title Insurance Fee ($200-$2,000) – When you refinance, your old loan is paid off and the lender’s title policy expires. Therefore when you refinance, your lender will require a new title insurance policy.
  • Attorney Fees ($300 – $1200)Lenders may charge a fee for having their attorney review all documents to ensure everything is completely legal. Lender fees can range from $300-$1200.

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