How Much Does It Cost To Refinance Your Mortgage?

BY The Lenders Network

How Much Does It Cost To Refinance

4 minute read

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.

No-Cost Refinance

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.

More tips to raise 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

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.

Streamline Refinance

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.

Costs of Refinancing a Home Loan

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

When you refinance your mortgage you’re getting an entirely new mortgage. Lenders charge between $100-$300 for the loan application fee. However, some lenders may waive this fee, or you can negotiate to have the fee reduced or waived altogether.

Loan Origination

Loan origination fees are how mortgage companies compensate the loan officer working on your application. Origination fees are between 1%-3% of the loan amount on average.

The Home Appraisal

A home appraisal is a professional estimate of the market value of a property. In most cases lenders will require a new appraisal be performed on your home to determine it’s value.

Document Fees

There are several documents you will need to sign to complete your loan, including truth-in-lending, sellers disclosures, etc. You can expect to pay somewhere between $200-$400.

Title Search Fee

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. You can expect to pay around $200-$400 for the title search fee.

Recording Fee

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. Expect to pay from $25 to $250.

Flood certification

Homeowners of property located in a federally designated flood zone may be required to add flood or life of loan insurance coverage. To get a certification, expect to pay $50 to $150.

Home Inspection fee

A home inspection is not always required but in some cases a lender may require it. An inspection is performed by a profession to check the property for any potential issues. The average home inspection costs between $300-$500.

Attorney fees

Lenders may charge a fee for having their attorney review all documents to ensure everything is completely legally. Lender fees can range from $300-$1200.

Survey fee

The home survey documents boundaries for the property. A professional survey costs between $100-$350.

Discount Points

Discount points are pre-paid interest you can pay up-front to lower the interest rate on your loan.

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