Refinance Closing Costs Calculator
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What You Should Know
- Refinancing a mortgage implies paying off the current outstanding mortgage and originating a new mortgage.
- When a new mortgage is originated, closing costs still apply even if done through a refinance.
- Refinance closing costs may range from 2% to 5% depending on the borrower's financial situation, their choice of lender, and other service providers.
- This refinance closing costs calculator allows you to estimate your closing costs at the time of the refinance.
| Fixed Costs | |
Loan Application Fee | $ |
Home Appraisal Fee | $ |
Credit Report Fee | $ |
Lawyer Fee | $ |
Title Insurance Fee | $ |
| Variable Costs | |
Loan Origination Fee | $ |
Mortgage Points Cost | $ |
Upfront Mortgage Insurance | $ |
Refinance Closing Costs
When a borrower chooses to refinance their mortgage, they are technically paying off their current mortgage and getting a new mortgage instead. Even though a borrower has to pay more in closing costs for a new mortgage, refinance closing costs may still cost them a significant amount of money, which may eliminate the benefit of refinancing in the first place. Since it is a significant expense, a borrower should be aware of it and consider whether it makes sense for them to refinance, given the closing costs that come with that.
Average Refinance Closing Costs
Refinance closing costs usually range from 2% to 5% of the refinance principal. For example, if you are refinancing your mortgage for $300,000, closing costs can range from $6,000 to $15,000.
Refinance closing costs usually include fees that are paid to a lender, an insurance provider, and third-party service providers. Some closing cost fees are fixed, which means that they do not vary with the refinance principal. Other closing cost fees are variable, which means that they depend on the refinance principal. In addition to that, some fees can be negotiated directly with the lender or service providers. The following table provides a breakdown of common fees included in refinance closing costs.
| Fee Type | Fee Amount | Is Negotiable |
|---|---|---|
| Fixed Closing Costs | ||
| Loan Application Fee | $75 - $500 | ❌ |
| Home Appraisal Fee | $225 - $700 | ✅ |
| Credit Report Fee | $10 - $100 | ❌ |
| Lawyer Fee | $50 - $600 | ✅ |
| Title Insurance Fee | $400 - $900 | ✅ |
| Variable Closing Costs | ||
| Loan Origination Fee | 0.5% - 1.5% of Principal | ❌ |
| Mortgage Points Cost | 1% of Principal | ✅ |
| Upfront Mortgage Insurance | Depends on Loan Type | ❌ |
How to Calculate Refinance Closing Costs
This calculator allows you to estimate the closing costs of a refinance for different loans such as conventional loans, FHA loans, VA loans, and USDA loans. Even though their fixed costs tend to be the same, their variable costs and mortgage insurance costs may differ. For example, FHA loans require an FHA upfront mortgage insurance premium of 1.75% which is included in the closing costs. On the other hand, private mortgage insurance used for conventional loans is usually paid in monthly installments, and it may not be considered a part of closing costs.
Understanding your refinance closing costs allows you to estimate how much you will have to pay for the closing costs at the time of the refinance as well as save on some of the closing costs if they are negotiable or not required. The following list describes the items that are usually included in the refinance closing costs.
Loan Application Fee: This fee is an administrative fee charged by your lender for the preparation of the refinance application and all related documents. It is usually non-negotiable, and it ranges from $75 to $500 depending on the lender.
Home Appraisal Fee: A lender may require a qualified third party to appraise the property used as collateral before issuing a loan. A borrower may be able to negotiate the fee with the appraiser or avoid appraisal fully if the loan-to-value ratio of the refinanced loan is low enough for the lender to remove the appraisal requirement. Home appraisal fee usually ranges from $225 to $700 depending on the size of the house and the service provider.
Credit Report Fee: A lender will request a credit report from one of the credit reporting agencies. These agencies charge a fee for their services that usually cannot be negotiated. In addition to that, their services have a fixed price because they do not vary based on the refinance loan principal. Credit reporting agencies usually charge between $10 and $100.
Lawyer Fee: Lawyers may be required to oversee the refinance process as well as conduct a title search. It is a good idea to have lenders oversee the process, and lenders often require them to work with them. Lawyer fees can be negotiated with the lawyers directly, and the price will depend on what lawyers a borrower will get. Usually lawyers will charge from $50 to $600 depending on the case and complexity of the tasks given to them.
Title Insurance Fee: Title insurance fee is usually required by lenders when the ownership title is not fully clear. It may happen when there are liens outstanding on the collateral or when the lawyers cannot confirm a clear title. This refinance closing cost item is fixed, and it can usually be negotiated with the insurance providers. Title insurance fees can range between $400 and $900, depending on the situation of the borrower.
Loan Origination Fee: This fee usually ranges from 0.5% to 1.5% of the loan amount, and it is charged by the lender for providing the loan amount. A borrower may ask whether there are any discounts for the loan origination fee and try to negotiate the fee to save on refinance closing costs.
Mortgage Points Cost: Mortgage discount points are usually priced in relation to the refinanced loan principal. One point usually costs 1% of the principal amount. Mortgage discount points provide an interest rate reduction. One mortgage point usually provides from 0.25% to 0.5% reduction in interest rate.
Upfront Mortgage Insurance: Some loans such as FHA loans, VA loans and USDA loans require an upfront mortgage insurance to be paid. This mortgage insurance payment may be included in refinance closing costs and increase the closing costs by 0.5% - 3.6% depending on the loan chosen for refinance.
Frequently Asked Questions
Do You Have to Pay Closing Costs When You Refinance?
Yes, you have to pay closing costs when you refinance. Refinancing a mortgage implies paying off a current mortgage and getting a new mortgage. You will have to pay closing costs on refinancing even though the items included in the refinance closing costs may differ from the items included in the closing costs for a new mortgage.
What Is the Average Closing Cost to Refinance a Mortgage?
The average refinance closing costs in the US for 2021, which has the most recent data available, was around $6,800. It is likely that the average refinance closing costs for the year 2022 will rise due to price increases in the service sector and real estate. As a rule of thumb, refinance closing costs usually range from 2% to 5% of the refinance principal. The following table provides expected lower and upper bounds of refinance closing costs for different mortgage principals.
| Mortgage Principal | Closing Costs (Low) | Closing Costs (High) |
|---|---|---|
| $100,000.00 | $2,000.00 | $5,000.00 |
| $200,000.00 | $4,000.00 | $10,000.00 |
| $300,000.00 | $6,000.00 | $15,000.00 |
| $400,000.00 | $8,000.00 | $20,000.00 |
| $500,000.00 | $10,000.00 | $25,000.00 |
| $600,000.00 | $12,000.00 | $30,000.00 |
Are Refinance Closing Costs Tax Deductible?
Not all refinance closing costs are tax deductible. Only mortgage interest and real estate taxes are tax deductible. Other items of refinance closing costs, such as insurance payments and service fees are not tax deductible. It is important to note that mortgage insurance is tax deductible, so it can be deducted if they are included in refinance closing costs.
Can I Refinance My Mortgage With No Closing Costs?
No closing costs refinance exists, and you can refinance your mortgage with no closing costs if your lender provides such a service. It is important to note that no closing costs refinance may look like a cheaper alternative to regular mortgage refinancing, but it is in fact more expensive. Closing costs are rolled into the mortgage principal and are amortized with the principal amount. It will accrue interest, and the lender may charge a higher interest rate on a no closing cost mortgage.
Can You Negotiate Closing Costs on a Refinance?
Some fees included in refinance closing costs can be negotiated. Refinance closing costs include different fees paid to service providers. If the market is competitive, you can shop around for cheaper service providers and even negotiate the price with your service provider. Some fees cannot be negotiated such as upfront mortgage insurance for government-backed loans, because their fees are fixed for all borrowers. You can also save on closing costs when getting a loan for specific projects. For example, a construction-to-permanent loan prevents you from paying closing costs when your loan becomes a mortgage.
How Do I Reduce My Mortgage Refinance Closing Costs?
Refinance closing costs can be a significant expense during the refinancing process so it is important to know how you can reduce your fees included in the closing costs.
However, if you do not have the money saved up or do not plan to stay in the home for long, you can choose a no-closing-cost refinance as it will help you get a refinance and the total interest paid will not be too large in a short period of time.
- Shop Around for Lenders and Service Providers: It is essential to shop around for different lenders. Each lender can offer a different rate and service and it is essential you get a lender that best satisfies your needs. A lender who can offer you a better refinance rate can save you a lot of money in interest and closing costs.
- Negotiate Fees With Service Providers: the largest closing cost fee is the loan origination fee; this fee is negotiable and can be reduced. If you have reached out to several lenders you can use that to bargain a better deal with the lender you choose. If you have a high credit score and low debt-to-income (DTI) ratio you can get some of the fees waived.
- Request an Appraisal Waiver: You can reach out to your lender for an appraisal waiver which can save some money.
- Watch Out for Variable Fees: Several of the closing costs are variable and can be negotiated. It is essential that you search for several service providers who can provide a low-cost deal.
- Ask for Title Insurance Discounts: If you work with the same company that provided the title insurance for the original mortgage, they might be able to offer you a discount.
- Avoid Mortgage Discount Points: Discount points can save you money down the road, but they will increase your refinance closing costs. If your goal is to save on refinance closing costs, you should avoid mortgage discount points.
When should I not use a no closing cost refinance?
The amount of time you stay in the home plays a huge role in your overall savings. If you plan on staying in the home for a short period of time (less than 5 years) then a no closing cost refinance with the higher interest option makes sense as you will be paying the higher rate for only a short time. However, if you plan on staying in the home for longer, the higher monthly mortgage payments can result in a much higher total interest payment.