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Several factors can affect refinance closing costs, including the loan size, type of refinance, and property location. If you’re prepared for these fees, refinancing could be financially worth it. In some cases, you might even be able to lower these costs and pay less for your refinanced loan.
Here’s what you need to know about refinancing closing costs and how to lower — or outright avoid — certain fees.
What are refinance closing costs?
Refinance closing costs are the expenses — or fees — that come with getting a new mortgage to replace your current one. They’re either fixed or a percentage of your new loan amount.
In many ways, these costs are similar to the closing costs you have to pay when you purchase a home. As with your original home purchase, you may need to pay origination, home appraisal, attorney, application, and lender title fees when you refinance your mortgage. Depending on the lender, you may or may not have to pay for certain things again, such as inspection fees.
You might also have to pay recurring costs like property taxes or homeowners insurance when you refinance your mortgage. The types of fees and their amounts can differ depending on the lender. This means you could end up paying more — or less — based on which lender you choose.
Mortgage refinance fees are usually lower than home purchase fees, which average $3,860 nationwide, not including transfer taxes. In comparison, the average closing costs for a single-family refinanced home was $2,375 without taxes in 2021, according to CoreLogic’s Closing Corp report.
Examples of closing cost fees
Refinancing a mortgage could be smart financially, but you should still consider the potential costs associated with it. Here are the most common fixed and percentage-based mortgage refinance closing costs and how much each one typically costs. Remember, these costs can vary based on your location and loan amount:
- Credit report fee: Most lenders will do a hard credit pull of your financial profile at least once during the loan application process. They may do this several times to see if your financial or credit situation has changed. This costs about $25 per report per applicant.
- Attorney fees: Although you don’t need a real estate attorney, having one can make the refinancing process easier. Attorneys usually charge either an hourly or flat rate for their services. Fees typically range from $500 to $1,000.
- Recording costs: These government fees may be required for recording your mortgage deed — or property title — and other documents related to your mortgage loan. They cost $25 to $250, depending on your state and total loan amount.
- Tax service fees: Lenders often charge a tax service fee upon closing to ensure you pay your property taxes on time. This can include title search fees and title insurance fees. You may need to purchase your own title insurance policy to protect your home. You may also have to get a buyer’s title insurance policy. The total cost for this can range from $300 to over $2,000.
- Underwriting fees: Underwriting is when a finance professional or loan officer looks over your financial situation and determines whether to offer you mortgage refinancing. This can cost anywhere from $300 to $900.
- Origination fee: Some lenders will also charge an origination fee for processing the loan. This can be 1% to 1.5% of the loan amount.
- Appraisal fees: You may want to get your home appraised for its current market value. If you do, expect to spend between $500 and $1,000 on this.
- Survey or inspection fees: If you want to get your land inspected for its current value and condition, you can expect to spend $150 to $400.
- State and local taxes: You may also be required to pay state and local taxes when you refinance your home. The exact amount varies by location.
In all, you could end up spending between 3% and 6% of your current principal balance in refinancing fees.
What is a no-closing cost mortgage refinance?
A no-closing cost mortgage refinance, or no-closing loan, is a refinanced loan that doesn’t come with upfront closing costs. Instead, a mortgage lender or broker will typically either charge you a higher interest rate or increase the loan amount to cover the cost of the loan. As the borrower, you’ll then be able to pay back the closing costs over time.
Rolling your closing costs into a no-closing loan might be a good option if you:
- Don’t have or don’t want to spend money on closing costs upfront because of other financial obligations.
- Plan to sell your home sooner rather than later and can avoid paying much more in interest.
- Recently purchased your home and are trying to rebuild your cash reserves or savings.
If you’re thinking about getting a no-closing cost refinance, start by shopping around for the best mortgage rates. Check with different lenders to see if they offer this option or not. Then, choose the most competitive offer and apply.
Once a lender approves your loan application, schedule the closing date and finalize the process. You shouldn’t have to pay any extra money since the closing costs will be rolled into your new loan balance or a higher interest rate.
How to minimize your refinance closing costs
Here are some of the best ways to lower your refinance closing costs:
- Build up your credit score. Having a good credit score — 670+ FICO — can help you qualify for better terms or a lower rate on your refinanced loan.
- Compare lenders. You don’t have to refinance your loan with your current lender. Shop around and compare several lenders to see if one offers refinancing at a lower rate.
- Steer clear of cash-out refinances. A cash-out refinance lets you convert home equity into cash for things like home renovations. But the more you borrow, the higher your loan amount will be — and the more you’ll pay in closing costs.
- Negotiate on the costs. Some lenders will reduce certain fees — such as origination fees — if you negotiate with them.
- Use your current title insurance company. You might be able to get a discount on your title insurance policy if you use the same company that issued your original loan.
- Look into streamline refinance programs. Depending on your home loan, you may qualify for a program that lowers or waives certain fees. For example, U.S. Department of Agriculture (USDA) loans offer a streamlined assist refinance option, which doesn’t require an appraisal.
Frequently asked questions
Here are some frequently asked questions about refinancing your mortgage.
Can you lose home equity by refinancing?
In short, no. You will not lose equity when you refinance your mortgage loan. However, your equity could fluctuate with the market.
What are some downsides to refinancing a home mortgage?
A mortgage refinance comes with several potential downsides. It could lead to a higher monthly mortgage payment if you opt for a shorter term. You also might not save as much as you expected if you go with a longer-term or have to pay higher closing costs. The refinancing process can also show up as a hard inquiry on your credit report, which could impact your credit score.
Are refinanced loans tax-deductible?
Most closing costs are not tax-deductible. However, you may be able to deduct certain costs from your loan when you file your taxes, such as when you use some of that money to pay for home improvements.
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