Mortgage refinancing is one way to save money on interest payments, cash out some of your home equity to use on home repairs or improvement projects, or just lower your monthly payment. Just like your initial mortgage, a refinanced mortgage comes with closing costs and fees.
Let’s take a closer look at the benefits and cost to refinance your mortgage so you can make an informed decision about refinancing.
Refinancing a mortgage is the same as closing on your house, minus the down payment. Depending on your financial situation, the costs may not outweigh the overall money-savings of the refi. Refinancing could save you tens of thousands of dollars over the life of the new mortgage. In most cases, that is much more than the closing costs you’ll have to pay.
According to Freddie Mac, the average cost of mortgage refinancing is $5,000. You can expect to pay approximately 2% to 5% of the total loan amount in closing costs. Your closing costs can also be affected by:
Are you wondering, what does it cost to refinance a mortgage? Here’s a list of the possible mortgage refinance fees you will pay to close a refi and what you can expect to pay for each:
|
Credit Report Recording Loan Origination Fee Title Insurance Prepaid Interest Charges Flood Certification Mortgage Points Home Appraisal |
$30 to $50 Up to $250 0.5% to 1.5% of the loan amount $1,000 Depends on rate and day of closing Up to $25 Depends on number of points at 1% of loan amount per point $200 to $600 |
If you are considering refinancing your mortgage, you are probably interested in saving money. A mortgage refinance can save you the most money in the long term, but it could cost you some money up front. To take advantage of a low-cost mortgage refinance, consider these strategies for lowering closing costs.
Reducing the amount of money you have to pay to close your mortgage refinance could help make it more affordable for you to cash in on the savings of a lower interest rate or reduced term mortgage. Can you avoid closing costs when refinancing? Let’s explore that idea further.
A no-cost mortgage refinance means that you do not pay certain fees at closing. It does not mean that you do not pay fees at all, however. Your lender may be willing to pay your loan settlement costs in exchange for charging you a higher interest rate on your mortgage loan.
Another option to help lower mortgage refinance closing costs is via a no-cash refinance. In this situation, the loan settlement costs are incorporated into the mortgage loan’s balance, and you pay for them over time.
Refinancing your mortgage might allow you to save money by taking advantage of lower interest rates, shorten the term of your mortgage loan so you pay it off faster, or get cash to make home repairs or pay off high interest debts. If you have money for the mortgage refinance closing costs, you could save quite a bit in the long term by refinancing.
Mortgage refinance closing costs encompass several types of fees, from appraisal fees to interest payments. The fees for services like appraisal and title insurance are not deductible. Any money you pay at closing for mortgage interest or real estate taxes may be tax deductible. Ask your tax-preparer if mortgage refinance closing costs are tax deductible to confirm your specific situation.
Refinancing to a lower interest rate or a shorter-term mortgage loan can save you money, lower your monthly payment, provide cash or reduce the number of years you have to pay off your mortgage. Even lowering your interest rate by less than one percentage point can still save you thousands over the life of the mortgage.
Are there closing costs on a mortgage refinance? Sure, there are. The average closing costs to refinance a mortgage can be about $5,000. By making that investment, you could save several times that amount in interest payments over the life of the loan.
It’s important to calculate potential closing costs and savings on refinancing your mortgage. Union Home Mortgage is here to help. Learn more about refinance closing costs on our Refinancing page.