Refinancing your mortgage is supposed to save you money or free up some cash so you can pay for home improvement projects or other needs. But refinancing can also be expensive. That’s because refinance closing costs add up in a hurry, potentially costing you thousands of dollars. In fact, the average cost to refinance a mortgage is $4,345. Thankfully, there are ways to avoid some of these costs and keep more money in your pocket. Here’s a look at some common refinancing costs and what you can do to save money.
Common Refinance Closing Costs
The final amount you pay in refinancing costs will largely depend on the value of your home. This includes assessing the area in which you live. Before closing day, your lending agent should provide you with a list of all the documents you’ll need to bring. They will also provide you with all the costs you’ll need to pay. Here are some of the most common closing costs you’ll encounter when refinancing a mortgage:
1. Loan application fee
- These fees help lenders cover the cost of processing a refinancing application and will often be waived once the refinancing process is complete. However, most lenders will not return the fee if your application is denied.
Average cost: $100-$300
2. Loan origination fee
- Along with the underwriting fee, the origination fee will typically make up the bulk of your refinance closing costs. Essentially, this fee compensates the lender for processing and putting the loan in place.
Average cost: 0.5-1.5% of the loan amount
3. Loan underwriting fee
- This fee may be combined with the loan origination fee, or they may appear as two separate charges. Essentially, your lender uses this fee to pay a mortgage underwriter to evaluate your ability to pay back the amount loaned.
Average cost: 1% of the loan amount
4. Credit report fee
- Unless you’re getting a FHA streamline refinance, your lender will check your credit report before approving a refinance. The fee you pay covers the cost of getting the reports from the credit reporting agencies, although some lenders will waive this fee.
Average cost: $15-$50 per report
5. Home appraisal fee
- Because housing markets change quickly, your lender will likely order a new home appraisal to assess the current value of your home.
Average cost: $300-$500
6. Title insurance fee
- Title insurance protects against any issues with the title of your home (liens, unpaid taxes, competing ownership claims, etc.). Even though you likely paid for title insurance when you bought your home, you’ll need to do so again. This is because your new loan means the original policy is no longer valid.
Average cost: $1,000, but this can vary widely depending on where you live
7. Title search fee
- In addition to title insurance, you may also have to pay for a title company to conduct a search to make sure there are no issues with your right to ownership.
Average cost: $200-$400
8. Miscellaneous lending and document fees
- These may include fees for things like loan processing, government recording, truth-in-lending documents, seller’s disclosure forms, flood certification, tax services, wire transfers or other administrative procedures. These fees are often lumped together.
Average cost: $650-$1,250, depending on the nature of your refinance and where you live
9. Discount points
- Discount points are an optional fee you can pay to lower your interest rate, saving money in the long run. Generally, the cost of one discount point is equal to 1% of the loan amount. In return for paying this fee, your lender will typically reduce your interest rate by 0.25%.
Average cost: 1% of your loan total per discount point
How to Reduce Refinancing Costs
Some mortgage lenders offer “no-closing-cost refinancing”. This type of refinancing rolls your costs into the principle amount, essentially increasing the size of the loan. But this doesn’t actually reduce your closing costs, it just allows you to pay them more slowly. To really save money, you need to work with an organization like Homes for Heroes.
At Homes for Heroes, we’re dedicated to helping heroes — law enforcement, firefighters and EMS, teachers, healthcare professionals and military — save as much money as possible when buying, selling or refinancing a home. When you register for our unique program, you’ll be automatically matched with a mortgage specialist in your local area. They will help you navigate the mortgage refinancing process and work to save you money by offering reduced lending fees. Our mortgage specialists provide these discounts to show their gratitude for all that heroes do in our communities.
In addition to the service and savings provided by our mortgage specialists, heroes can also save money using the Homes for Heroes local deals tool. This page features discounts from home inspectors, title companies, appraisers and other real estate specialists across the country. By working with Homes for Heroes and taking the time to search out the best deals, you can save on closing costs and accomplish your home refinancing goals.
Ready to refinance your mortgage and save? Register with Homes for Heroes and start saving today.