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Mortgage refinance costs

By | Published: Feb 03, 2010 | 9 Comments

Interest rates are lower now than they've been in years, and many homeowners are taking advantage by refinancing their mortgage. But when is a good time to refinance? How do you know if refinancing is worth paying the closing costs again? And how much does it cost to refinance?

First of all, it's important to know how much you're going to save by refinancing. If you don't have many years left on the loan, then it may make more sense to keep the current mortgage rather than pay closing costs again. To find out how much you're going to save by locking in a lower rate, use a mortgage refinance calculator. If you'll save a significant amount each month by refinancing into a lower rate, then it's time to look into how much refinancing costs.

Contrary to popular belief, the bulk of the closing costs actually do not go to your lender. Instead, the costs go to pay third parties such as the title company, appraisers, and credit reporting agencies. You'll notice that refinancing a mortgage has very similar costs to purchasing a home for the first time. Here's a breakdown of what you should expect to pay at closing for a refinance.

Appraisal ($225 – $450)

Lenders have to know your home is still worth the amount you're borrowing. Just like before, your home has to appraise at or above the amount you're borrowing.

Credit Report ($15 – $30)

Lenders need a copy of your credit report to see your borrowing history. This is to make sure you're not a risky borrower, and the likelihood that you will pay the loan back is based on your payment history. This money goes towards credit reporting agencies such as Experian, TransUnion and Equifax.

Closing Fee ($150 – $400)

This fee is paid to the title company or attorney for conducting the closing.

Title Company Title Search or Exam Fee ($100 – $300)

This fee is paid to the title company for doing a detailed search of the property records for your home. The title company will look at prior deeds, court records, property and name indexes, and many other documents to ensure that there are no liens or problems associated with your ownership of the property.

Flood Determination/Life of Loan Coverage ($15 – $25)

This cost goes to determine if your property is located in a federally designated flood zone. If the property is found to be located within a flood zone, you'll need to buy flood insurance.

Courier Fee ($30)

This covers the cost of document transport to complete the loan transaction as quickly as possible to avoid paying additional interest on your mortgage loan.

Title Insurance (Lender's Policy) (Varies - generally between $175 – $875)

This covers the costs of assuring the lender that you own the home and the lender's mortgage is a valid lien.

Title Insurance (Owner's Policy) (Varies - generally between $175 – $875)

This is an insurance policy protecting you in the event someone challenges your ownership of the home.

Homeowners Insurance (Varies – $300 and up)

When you refinance, the homeowners insurance should be current at the time of closing. Lenders require a standard coverage at closing, but it should be a smooth transition when you refinance.

Overall, refinancing your mortgage costs a few thousand dollars, so make sure you're going to save more than this overall cost in the savings you'll make in your monthly payments. Also, keep in mind that fees vary between different third party companies and lenders, so the above breakdown is an approximation. For a customized estimate on your closing costs, ask your lender for a Good Faith Estimate based on your situation.


By Geoffrey Boyd,  Sat Jun 5 2010, 08:17
That was great information. The next step is to locate a local morgage professional to help with the process. In this market, using an online lender or one that does not provide local services could be painful. The disclosures related to borrower costs have changed dramatically and it would be wise to have someone review these new forms with you. Also, make sure to find out how much the fees being disclosed can change and what constitutes a "changed circumstance" for the lender. A changed circumstance allows the lender to change the fees prior to closing. If anyone has any questions about this, feel free to email me at: gboyd@mortgageproblog.com or visit our website at: http://www.geoffboyd.com
By Vincent Villafranca,REALTOR,  Sun Oct 10 2010, 19:29
I was a lender for 6 years before getting into Real Estate, it has done wonders for my business.
By Shawn Ryan Rosa,  Tue Dec 13 2011, 13:46
outstanding info - helpful to any owner considering a refi
By Paul Olivera,  Wed Jan 4 2012, 10:58
The mortgage balance can double on the lump sum in 5-7 years but the home also will appreciate. Not the way it was from 2001-2006 but it will continue to rise at a 2-4% pace per year. Most people that take out the lump sum usually do so because they are paying off a big mortgage. You should take into account all the future payments that you will not be making once you take out a reverse mortgage. That can be hundreds of thousands of dollars. A good site that told me all the truths about reverse mortgages was http://www.reversemortgagelendersdirect.com
By Matie,  Wed Jul 18 2012, 02:25
great article. Im' totaly agree with Paul.

By Kobe,  Fri Sep 6 2013, 05:34
That’s really great if the rates on mortgage are being lowered, but still I would suggest consulting an expert for better decision. As every lender has a different criterion for implementing the rates, does a good search online for reliable source as http://www.kwikpayday.co.uk for better assistance in knowing the facts and figures appropriately.
By Brittany Smith,  Mon Apr 21 2014, 09:29
Really good article! I think this article might help too: http://www.timesharescam.com/blog/167-cancel-timeshare-mortgage/
By Marianlawson4,  Fri Dec 4 2015, 21:46

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By Omsk0090,  Fri Mar 18 2016, 14:55
Thank you for this very useful post.


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