Refinancing your mortgage can be a great way to save money. But you’re going to have to spend a little money to do it. As they say, “No pain, no gain.” That pain largely comes in the form of closing costs, and they can be significant. Here’s a detailed look at the cost to refinance a home and how you can save money now and in the future.
Average Cost to Refinance a Home
The average cost to refinance a home is between 2 and 4 percent of the loan’s balance. That means that on a $250,000 mortgage, you could expect to pay between $5,000 and $10,000. These costs are generally paid at closing.
Those costs are significant, but if you’re able to reduce your monthly payment, you will be able to make up the difference. The point at which you recoup those costs is known as the break-even point. If you were to move before reaching your break-even point, it wouldn’t be worth it to refinance.
If you’re not lowering your monthly payment, but rather shortening your loan term, you’ll need to do some math to see how much you could save in the long run and compare that to your refinance closing costs.
In either case, it’s important to have a solid long-term plan before deciding to refinance your home.
Typical Fees and Refinance Closing Costs
There are a lot of expenses that make up your total closing costs. Here are just some of the items you can expect to pay when refinancing your house:
- Application fee
- Document fees
- Origination fee
- Recording fee
- Attorney fee
- Survey fee
- Title search fee
- Title insurance
- Appraisal fee
- Home inspection fee
- Flood certification fee
Not every refinance will involve all of these fees. What you end up paying will depend on your lender and the unique circumstances surrounding your property.
You can also add mortgage points to your closing costs, where you lower your interest rate by paying for interest up front. Typically, one mortgage point is equal to one percent of the loan. In exchange for paying that one percent, your lender will typically lower your interest rate by 0.25 percent. Although this is an added cost to refinance, it can save you money on interest in the long run. Once again, no pain, no gain.
How to Lower Your Costs
Lowering the cost to refinance can be difficult, but certainly not impossible. There are some costs that are non-negotiable, but others may have some wiggle room. Here are some ways to reduce the cost of refinancing your home:
The first way to lower your costs is to shop around for lenders. Interest rates can vary and it’s up to you to find the best deal and professional to work with. Be sure to speak with your local Homes for Heroes loan officer. They are already committed to reducing their fees for heroes like you. Simply register online to be connected with your local Homes for Heroes mortgage specialist and they’ll walk you through the process and answer all of your questions.
Another way to reduce the cost of refinancing is to opt for a “no-closing-cost refinance.” In these deals, the lender will waive the closing costs, but in exchange, you may receive a higher interest rate on your new mortgage. The lender can also roll your closing costs into the balance of the loan, and you’ll simply pay them off as part of your monthly mortgage payments.
A no-closing-cost refinance can be a good option for home owners who would rather avoid the expense now and effectively pay closing costs slowly over time. But remember, even a small increase in your interest rate can add up to a lot of money over the life of your loan.
Improve Your Credit Score
The interest rate you receive on your mortgage is based on a number of factors, but a major one is your credit score. The better your credit history, the lower the rate you’re likely to receive. So, if you’re thinking about refinancing your home, improving your credit score can help you secure a better rate and save you money over the life of your loan.
Save on Refinance Closing Costs with Homes for Heroes
Another way to save money is to work with Homes for Heroes. When you register online with no obligation, you’ll be automatically matched with a mortgage specialist in your area. They will work with you to get the best possible deal on your mortgage refinancing. Because they appreciate everything heroes do for our country, our mortgage specialists reduce their fees as a way to say thank you.
The Homes for Heroes discounts don’t stop there. You can also take advantage of the local deals provided by Homes for Heroes business affiliates and save on things like home inspections, title fees and more.
In the end, refinancing your home is about saving money. While there will always be a cost to refinance, by following these tips, you can lower your costs and keep more money in your pocket.
If you’re interested in refinancing your mortgage, register with Homes for Heroes and let our mortgage specialists save you money as a ‘Thank you’ for all that you do for our communities.