How much does refinancing cost?
Rfinance your mortgage can lower your interest rate, help you shorten your loan term, or convert equity into the funds you need – but, just like your first mortgage, there are closing costs to consider.
How much does refinancing cost?
The average closing costs for a mortgage refinance are around $ 5,000, although the costs will vary depending on the size of your loan and the state and county you live in, according to data from Freddie Mac.
Typically, you can expect to pay 2-5% of the loan principal amount in closing costs. For a mortgage refinance of $ 200,000, for example, your closing costs could range from $ 4,000 to $ 10,000.
Here’s a breakdown of the fees typically included in the refinancing closing costs:
|Registration fees||$ 75 – $ 300 or more|
|Origination and / or subscription costs||0.5% -1.5% of the loan principal|
|Registration fees||The cost depends on the location|
|Assessment fees||$ 300 – $ 400 or more|
|Credit check fees||$ 25 or more|
|Securities Services||$ 700 – $ 900|
|Investigation costs||$ 150 to $ 400|
|Lawyer / closing costs||$ 500 to $ 1,000|
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How to reduce the cost of refinancing
There are many ways to cut costs when refinancing your mortgage.
1. Boost your credit score
The higher your credit, the lower the interest rate you will be eligible for when refinancing. To get the best possible rate, work on improve your credit before you start to apply for refinancing. Check your credit report at AnnualCreditReport.com and examine it for errors. If you spot an error, you can dispute it by contacting the credit reporting agencies (Equifax, Experian, or TransUnion). Maintain your credit by paying all of your bills on time, keeping your credit card balance well below the limit, and paying more than the minimum amount if possible.
2. Compare mortgage offers and rates
Shop for compare refinancing rates and conditions of several banks and mortgage lenders. You can work with a mortgage broker to get a range of offers. Also, be sure to check with your existing lender – as a regular customer, you may qualify for discounts or specials that could dramatically lower your overall costs.
3. Negotiate closing costs
As with your first mortgage, take a close look at your lender’s loan estimate to see the cost breakdown. You can save money by negotiate closing costsespecially if you’ve shopped and have more than one refinance offer on hand. If some fees seem unusually high, including administration fees, underwriting fees, or rate blocking fees, it is worth questioning the lender to see if these can be reduced.
âThe best thing to do is to make comparisons,â says Kim Bragman, associate broker at Phyllis Browning Company in San Antonio, Texas. “It’s not so much about negotiating as it is about finding the best prices, both in terms of interest rates and closing costs.”
4. Request fee waivers
Likewise, ask your bank or lender if they will drop or reduce the credit file or check fee. You can also see if this will allow you to forgo a new home appraisal or a survey if you recently did one. Your lender may be willing to work with you, especially if you are an existing customer.
5. Evaluate whether to buy mortgage points
If you want to lower your closing costs, consider purchasing mortgage or reduction points Is it worth it. While purchasing points lowers your interest rate, it’s usually only best when you plan to own the home for a long time. You can use Bankrate mortgage refinance calculator to help determine if it is worth buying points when refinancing.
6. Go with your original title insurer
You can try to reduce your title service costs by asking your current title insurance company how much they would charge to reissue the policy for your refinanced loan. It might cost less than starting over with a new business or policy.
7. Consider refinancing with no closing costs
If you’re short on cash, consider a refinancing without closing costs. It’s not free, but it does mean you won’t have to pay a closing fee. Instead, the lender will increase your interest rate or bend the closing costs in the new loan.
The advantage of refinancing with no closing costs is that you don’t have to find thousands of dollars to pay the loan signing fees. The downside, however, is that you could end up paying more over the life of the loan.
âIt really depends on how long you plan to stay in the house,â Bragman says. “If you choose to forgo the closing costs but have a high interest rate on the loan, it can add up and you could end up paying more in the long run.”
Why refinance your mortgage
Refinancing your mortgage can save you thousands of dollars over the life of your loan. Here’s why you might consider refinancing your mortgage:
- Reduce your monthly payment – If you have a fixed rate mortgage with a rate higher than current market rates, refinancing could help you save money on your monthly mortgage payment. In general, it’s a good idea to consider refinancing if you can reduce your rate by one-half to three-quarters of a percentage point.
- Shorten the term of your loan – You can refinance your 30-year mortgage into a 15-year loan to pay it off faster and for less interest overall.
- Switching from a variable rate loan to a fixed rate loan – If you have an adjustable rate mortgage, maybe now is the time to lock in a historically low rate.
- Get rid of private mortgage insurance (PMI) – If you’ve reached 20% of your home equity, refinancing is one way to eliminate PMI.
- Get money for your goals – If you want to pay off your credit card debt, renovate your home, pay for your education, or have other financial goals in mind, you can do a cash refinancing, provided you have sufficient equity capital.
At the end of the line
The costs of closing a refinance can be significant, so take the time to shop around for deals and compare loan estimates to understand all of the costs involved. It is also worth trying to negotiate with the lender, as closing costs can sometimes be waived or reduced.