Refinancing a home loan can help you save money or accomplish other financial goals. But refinancing isn’t free.
How much it will cost you to refinance your mortgage depends on the type of loan you choose, your loan amount, and where you live. Here are the details.
How much will it cost to refinance my mortgage?
Many homeowners would like to refinance but are worried about the closing costs. Refinancing isn’t free, but it might not be as expensive as you believe, and there’s an easy way to avoid most of the costs. Either way, refinancing can be smart if you have a good reason to do it and expect to benefit from it.
The costs you’ll typically have to pay fall into two buckets:
- Origination fees charged by your lender
- Third-party fees charged by other companies involved in the loan process
Lenders charge a variety of loan origination fees, which vary by state. These include origination fees, originator fees, points, commitment fees, document preparation fees, lender fees, processing fees and underwriting fees. The table below shows a range of typical fees, but lenders don’t usually charge all of these fees. More likely, you’ll see various fees from different lenders.
Although these fees have different names, they are all essentially the same thing. They are the amounts the lender charges you for underwriting, processing, and originating your new loan.
Some origination fees are based on a percentage of your loan amount while others are flat fees. Fees that are described as “points” are typically percentage-based. One point equals 1% of the loan amount.
How much do mortgage origination fees cost in my state?
The average origination fees for the United States is $951. Origination fees vary from one state to another but the difference between the most expensive state (Georgia) and the cheapest (New Jersey) is just over $220.
Examples of third-party fees include appraisal fees, attorney fees, and closing fees. Some lenders break it down further into settlement fees, credit report fees, survey fees, flood certification fees, title search, title insurance, and recording fees. Fees vary depending on the lender and their service providers. The table below shows a range of the fees you can expect to pay. Again, lenders don’t usually charge all of these fees. More likely, you’ll see various fees from different lenders.
How much do third-party mortgage fees cost in my state?
Third-party mortgage refinancing fees vary widely by state. The differences between states are much larger for third-party fees than origination fees. The average in 2017 was around $1,133.
Why some fees are going up
Matt Hackett, operations manager at direct mortgage lender Equity Now, says two refinancing costs that have gone up in recent years are recording fees and credit report fees.
Recording fees are paid to local governments for updating their property ownership records to show an old mortgage was paid off and a new one put in place.
This is a per-page charge from the county where the property is located. Some counties in New York are extremely expensive”
“This is a per-page charge from the county where the property is located. Some counties in New York are extremely expensive,” Hackett says.
Credit report fees are paid to credit reporting bureaus for generating credit reports and scores for lenders. Lenders today typically re-check your credit immediately before closing.
This additional check helps lenders make sure they’re originating good-quality loans that borrowers should be able to afford, but adds another cost for borrowers, Hackett explains.
How much you’ll pay to refinance depends on the lender you choose and your loan amount as well as where you live, says Brett A. Rothrock, branch manager at Residential Home Funding Corp. in Somerville, N.J.
“The costs vary from lender to lender,” Rothrock says. “An estimate for a loan amount of $200,000 in the state of New Jersey would be approximately $2,500 to $3,000 with title costs (accounting for) the bulk of those fees.”
Here are some lenders you should check out during your research:
The only way to get exact costs for your situation is to apply for a loan and review the Loan Estimate form the lender will give you. This form, introduced in October 2015, is intended to simplify and clarify lenders’ disclosures of costs for purchase and refinance loans.
The federal Consumer Financial Protection Bureau offers an interactive Loan Estimate Explainer that shows you what you need to know about this form.
Refinancing without paying fees or closing costs
If you don’t want to pay fees to refinance, you can choose a no-closing-cost or low-closing cost loan.
This type of loan eliminates many of the upfront out-of-pocket fees. However, you will be charged a higher interest rate for your loan. That will make the loan more expensive every month that you keep it.
To figure out whether a no-closing costs or low-closing costs loan makes sense for you, you’ll have to ask a lender to help you make the comparison of a higher rate or paying the costs upfront. Your decision might depend on how long you plan to keep your loan and how much cash you have on hand to pay costs out of pocket.
If you want to preserve your cash for other priorities, a no- or low-closing cost refinance could be an attractive option. A mortgage refinance could save you thousands of dollars if you do it right, and that begins with doing the proper research.
To make it easy, check out SuperMoney’s mortgage refinance review page to compare rates and terms side-by-side.