What’s the Average Cost to Refinance a Mortgage?
Refinancing your mortgage can offer several benefits, such as lowering your monthly payment, accessing cash from your home’s equity, or altering your loan type and term. However, it’s important to remember that refinancing involves upfront costs similar to those you incurred when you initially secured your mortgage. Before proceeding, carefully evaluate whether the potential savings align with your financial goals.
How much does it cost to refinance?
According to ClosingCorp, the average closing costs for a mortgage refinance are around $2,375, not including taxes. These costs can vary based on the size of your loan and your location. Typically, closing costs range from 2 percent to 5 percent of the new loan amount. For example, refinancing a $200,000 mortgage might result in closing costs between $4,000 and $10,000. Here’s a breakdown of common fees:
| Closing costs | Fee |
|---|---|
| Application fee | $75 – $300 |
| Origination and/or underwriting fee | 1% – 1.5% of loan principal |
| Recording fee | $25 – $250 depending on location |
| Appraisal fee | $500 – $1,000 |
| Credit check fee | $25 |
| Title services | $300 – $2,000 |
| Survey fee | $140 – $400 |
| Attorney/settlement fee | $500 – $1,000 |
In addition to closing costs, you’ll be subject to a new interest rate on your refinance. This rate is influenced by several factors, including:
- Your credit score
- The lender you choose
- The type of refinance
- The size and term of the loan
- The type of property
How to lower the cost to refinance
Reducing the cost of refinancing can lead to significant savings on interest and help you realize those savings faster. Here are some strategies to lower your refinance expenses:
1. Boost your credit score
To secure the best refinance rate, you’ll need to meet certain credit score requirements. The higher your credit score, the better your rate. Boost your credit by paying down or paying off existing debt.
2. Compare mortgage offers and rates
Shop around and compare offers from multiple refinance lenders to find the best rate. Pay attention to the annual percentage rate (APR), which reflects both interest and fees. Consider using a mortgage broker to access a range of offers and request a quote from your current lender for potential repeat customer benefits.
3. Negotiate closing costs
Review the loan estimate from your lender carefully and negotiate closing costs if possible. Having multiple refinance offers can give you leverage to reduce fees. Compare different quotes to identify and challenge any unusually high fees.
4. Ask for fee waivers
Ask your lender if they can waive or reduce certain fees, such as the application or credit check fee. If you’ve recently had a home appraisal or property survey, inquire if these can be waived for the refinance.
5. Assess whether to buy mortgage points
Consider whether buying mortgage points, which lower your interest rate, makes sense for your situation. This option is typically best if you plan to stay in your home long-term and do not anticipate refinancing again soon.
6. Go with your original title insurer
In many states, title rates are regulated, but you can often save on title services by using your current title insurance company. Ask them about reissuing the policy for your refinanced loan, which could be cheaper than obtaining a new policy.
7. Consider a no-closing cost refinance
If cash is tight, look into a no-closing-cost refinance. While this option doesn’t eliminate closing costs, it allows you to avoid paying them upfront. Instead, the lender will either increase your interest rate or roll the costs into the new loan.
