What Are Refinance Closing Costs?
Refinancing a mortgage typically involves many of the same costs as purchasing a home. These expenses cover the services required to process, underwrite, and close your new mortgage. While the exact amount varies, understanding these costs is essential when deciding whether refinancing makes financial sense.
Typical Refinance Closing Costs
Most refinance transactions may include:
• Loan origination fees
• Credit report fees
• Underwriting fees
• Processing fees
• Recording fees
• Prepaid interest
• Escrow or impound account funding (when applicable)
• Taxes and insurance reserves (if required)
Discount Points
Homeowners may have the option to purchase discount points to reduce their interest rate. Paying points increases the upfront closing costs but may lower the monthly payment and total interest over time. Whether this makes sense depends on how long you plan to keep the loan.
What Is a No-Cost Refinance?
A “no-cost” refinance does not eliminate the costs of the loan. The lender may provide a credit toward some closing costs in exchange for a higher interest rate, or eligible costs may be added to the new loan balance. Some charges may still be paid by the borrower at closing.
Compare the interest rate, APR, lender credits, financed costs, monthly payment, and total cost over the time you expect to keep the loan.
How to Calculate Your Refinance Break-Even Point
A break-even estimate compares the refinance costs with the expected monthly savings. Divide the costs you pay or finance by the estimated monthly savings to approximate how long it may take to recover those costs. Include lender fees, third-party charges, prepaid interest, financed costs, and the effect of lender credits.
This is only one part of the comparison; changes to the loan term, loan balance, mortgage insurance, and total interest can affect whether refinancing makes financial sense.
Wondering whether refinancing makes sense for your situation?
We’ll review your current loan, explain the estimated closing costs, and help you determine whether the long-term savings justify the investment.
