How Much Does It Cost to Refinance a Mortgage?

It’s no secret there are closing costs with refinance mortgage loans. There are 3rd-party fees and mortgage refinance costs that must be paid in one way or another. Most borrowers choose not to pay the closing costs upfront, as most lenders will allow you to roll the closing costs on a refinance mortgage into the new loan amount.

mortgage refinance cost

You should also shop for a no-closing cost mortgage refinance but you must meet the lending requirements and the interest rates are typically higher with no cost refinancing.

Refinancing a mortgage is a big decision, and many factors go into making this important decision.

One of them is what it costs to refinance a mortgage. Learn about this important question below.

We also provide details about what refinance mortgages are and whether it is a good idea. If you have questions or wish to apply, our loan professionals can assist you!

What Does Mortgage Refinancing Cost in 2024?

Refinancing your mortgage can offer borrowers the opportunity to reduce interest expenses and lower their monthly payments.

However, it’s crucial to thoroughly grasp all associated expenses to gauge its viability. The mortgage refinance closing costs are similar to what you incurred when purchasing your home. This is because refinancing involves replacing your existing mortgage with a new home loan, often through a different lender altogether.

Borrowers opting for refinancing a mortgage are responsible for covering various fees, such as loan underwriting fees, appraisal fees, and title search fees. These refinance mortgage closing costs can accumulate, so if your objective with refinancing is to achieve savings, it’s essential to assess whether and when the reduction in interest rates will offset the refinancing expenses.

How Much Will It Cost to Refinance Your Mortgage?

How much it costs to refinance your mortgage depends on the lender and many other factors. However, the typical mortgage refinance costs the borrower approximately $2,370 in closing costs, which does not include taxes. The costs of the refinance will depend on the size of the loan, where you live, and the lender. Mostly, you can expect to pay between 2% and 5% of your loan balance for closing costs. So, if you refinance your $200,000 mortgage to get a lower rate, you could see $4,000 to $10,000 in closing costs. This cost can often be rolled into the loan.

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According to Freddie Mac, the average closing costs for refinancing stand at around $5,000. Nonetheless, it’s essential not to rely heavily on this figure as the cost of refinancing your mortgage could vary, potentially being lower or significantly higher based on factors such as the loan amount and other considerations.

This is a list of typical closing costs for refinancing a first mortgage:

  • Application fee: $75 to $500
  • Origination fee: .5% to 1.5% of your loan amount
  • Appraisal fee: $400
  • Credit check: $30
  • Title services: $700 to $900
  • Survey: $350 to $950
  • Attorney fee: $500 and up

If you want to refinance your mortgage and want more information about what it costs, check with your lender. They can provide exactly what they charge for each part of your closing costs.

How to Cut the Cost of Home Refinancing

The less you spend on your refinance, the more you could save on interest. Plus, you can reduce your out-of-pocket costs, which makes mortgage-refinancing even more attractive. Here are some ways to cut the cost of your new loan:

Increase your credit score: If you have debt or have not paid your bills on time, these things will lower your credit score. The fastest way to boost your score is to pay off debt, if you can afford it.

Look at different mortgage lenders and offers: Our loan professionals want to help you refinance your home. But we still encourage you to check with several lenders and programs to find the program that fits your needs best. Remember, the lowest rate is not always the best deal; some lenders may charge higher fees. You should compare APRs, not interest rates. The APR factors in closing costs, so it is easier to compare loan offers.

Ask about closing costs: Some closing costs are set in stone, but not all are. It never hurts to ask if certain closing costs can be waived or reduced.

Determine if it is worth it to pay for mortgage points: If you buy mortgage points to lower your rate, it will increase your closing costs. Is it worth it? Paying for points is usually only best if you plan to own your home for many years.

Use your first mortgage title company: You could cut your title services expenses by asking your first mortgage title company to handle your loan. This could cost less than starting with a new title company for the refinance.

Think about no-closing cost loans: If you don’t want to put out a lot of cash to refinance, think about a no-closing cost refinance. Every loan has closing costs, but this option allows you to pay closing costs by rolling them into the loan or paying a higher rate.

Can I Get a No Cost Refinance Mortgage?

no cost refinancingIn a traditional refinance mortgage transaction, the borrower typically settles a lump sum at closing to cover expenses like the lender’s origination fee and appraisal fees.

Conversely, in a no-closing-cost refinance, these expenses are not paid upfront by the borrower but rather spread out over time.

This can occur through either of two methods: rolling the closing costs into the new loan, thus increasing the balance; or accepting a higher interest rate.

There are many refinance lenders that offer no-closing-cost refinance mortgages.

Some companies offer a no cost mortgage, such as waiving refinance fees for returning borrowers or charging a reduced flat rate instead of a percentage.

Selecting a no-closing-cost refinance mortgage might be a suitable option if you anticipate a short stay in your home. However, if you intend to reside in your home for an extended period, opting for a no-closing-cost loan could potentially result in paying thousands more in interest.

What Is Refinancing a Mortgage?

Refinancing a mortgage means replacing your current mortgage with a new one, typically to reduce the rate, pull out cash, or both. With a lower interest rate, you could lower your monthly payment, and with cash out, you can pay for things you need or want, such as fixing up the home.

When you refinance your mortgage, you are taking out a new home loan on your residence. It could be for the same amount as what you owed before, but not always. The new loan usually has better terms than the previous one. But whether it is the right move for your situation depends on:

  • The equity in the property
  • Your credit score
  • How much you owe
  • Your current rate and current market rates
  • How much money you want to borrow

Why Should You Refinance a Mortgage?

There are several reasons that homeowners may choose to refinance their mortgage:

You could reduce your monthly mortgage payment: Most people refinance their mortgage to lower their interest rate. If you have a fixed-rate home loan with a rate that is higher than today’s rates, doing a refinance can help you save on your payment. Many experts say refinancing is good if you can drop your rate by at least ¾ of a percent.

You could shorten your loan term: Another reason people refinance is to shorten the loan to 15 or 10 years. This action will boost your payment usually, but you will pay much less interest than with a 30-year loan.

You can switch to an adjustable or fixed rate loan: Borrowers may want to get into a fixed rate loan, or they may want to change to an adjustable-rate loan. Which is best depends on your circumstances, how long you will own the home, risk tolerance, and other factors.

You could dump PMI: If you have less than 20% equity in your home, you may have to pay mortgage insurance or PMI. This insurance protects the lender if you default. Once you have at least 20% equity, you can usually cancel PMI on a conventional loan. But if you have an FHA loan, you may need to refinance to drop mortgage insurance.

You could get cash you need: If you do a cash-out refinance, you can get a lot of cash for renovating your property, paying off debt, or paying for medical expenses.

Why Should You NOT Refinance a Mortgage?

There are some cases where you might consider if refinancing is the right move:

Your current rate is lower than market rates: A homeowner generally should not refinance a first mortgage if their current rate is lower than market rates. In 2024, rates are still elevated, so many homeowners are not refinancing. Instead, they may consider getting a home equity line of credit or home equity loan (our loan professionals can also help you with these handy second mortgages). A 2nd mortgage lien gets you the cash you need without touching your first mortgage. Check today’s 30 year mortgage rates.

You have not had the mortgage for long: Many lenders require a loan to be ‘seasoned’ before it can be refinanced. You may need to wait a year or so to refinance.

You have a lower credit score: You may want to wait to refinance if your credit score needs work. What do bad-credit refinance mortgage options look like.

Summary on Refinance Mortgage Costs

Closing costs are an integral component of mortgage refinancing. However, the positive aspect is that you’re not required to pay them upfront. Many mortgage refinance lenders offer the option to roll your closing costs into the new mortgage, allowing you to gradually repay them over time.

Of course this increase your monthly payment, so it’s advisable to utilize a mortgage calculator to gauge the impact. Nonetheless, it’s reassuring to know that you typically don’t need to come out of pocket to your mortgage refinance closing if you opt not to, as long as you’re willing to accept a higher mortgage payment in the future.

To minimize refinancing expenses, it’s paramount to explore various refinance lenders. Besides assessing refinance rates, it’s crucial to compare their origination fees, processing fees, application fees, and appraisal fees.

Refinancing can be a good choice if you will have better terms with your new first mortgage than the old one. If not, you may want to think about other options, such as a home equity loan vs refinance to get cash. Speak to one of our loan professionals today with help with mortgage refinance or other mortgage product.

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