What Does it Cost to Refinance Your Home?

Refinancing a mortgage is often a good way to reduce monthly expenses and save tens of thousands of dollars in interest over the life of the loan, but there are costs involved that should be carefully considered before deciding whether to refinance your home loan.

Cost to Refinance Your Home

Typical refinance closing costs for an average loan range from 2 to 3 percent of the loan amount and may include the following fees:

• Refinance Loan Application Fee. Expect to spend an average of $400 for an application fee with a range of $250 to $500.
• Lender Closing Fee. The nationwide average for lender closing fee runs roughly $725 to $750.
• Settlement Fees. Tack on another $350 to cover common settlement fees.
• Title Examination. Depending upon your state, title examination can range from $150 to $450.
• Title Insurance. This varies widely from state to state and agency to agency so it pays to shop around, but in general expect to pay from $225 to $400.
• Document Preparation Fees. These will run approximately $200 to $400.

• Escrow. If you owe escrow taxes and insurance, there is often a pre-rated amount that should be transferred from the existing account into the new mortgage account. Verify that all sums are accounted for and in good standing both before and after obtaining a mortgage refinance.
• Points. Points are essentially a fee paid in advance in order to obtain or “buy down” interest rates. They can be a wise investment especially for those intending to remain in the home for a longer period of time or for someone that needs to reduce long term fees. For example, many retirees facing a fixed income with the expectation of “aging in place” would benefit from paying points in exchange for a lower interest rate. Likewise, new parents desiring to stay home with the children with only one person working are also likely to find paying points an excellent way to reduce future fixed mortgage expenses while taking advantage of a current higher household income.

Before closing, you will receive a customized cost estimate for your specific closing costs and other fees that will be included in the loan or due in cash at closing. Remember, you can often reduce expenses and refinance closing costs by shopping for your own affordable title insurance and other providers however, the bank or lending agency will usually require their own independent appraisal and survey even if you have recently had one done. It's important to find a refinance lender you can trust.