Fees to Refinance
Closing costs are the fees you pay when you refinance. Some closing costs are paid directly to the mortgage lender, while others go to third-party service providers. Among the closing costs you may have to pay to refinance your mortgage loan are:
- Application fee, which is charged by the mortgage lender. This fee covers the cost of originating your mortgage. This fee is usually nonrefundable whether or not your application is approved.
- Loan origination fee, which is usually one percent of the loan amount.
- Discount points can lower your mortgage rate. A point equals 1% of the loan amount. When deciding whether to pay points it's important to do the math the determine how long it would take to recoup the cost with the savings created by the lower mortgage rate. The longer you plan to keep your home, the more likely paying points can save you money.
- Appraisal fee is paid to a thrid party to value your home. Depending upon where you live, an appraisal runs about $250 to $400.
- Title insurance ensures that you have clear ownership of your property. Local records are examined to make sure there are no liens or other claims that threaten your ownership of the property. A lender's policy is mandatory when refinancing. It protects only the mortgage lender. An owner's policy protects you.
- Attorney fees are paid directly to a lawyer when one is needed. In some states, home loans are closed by lawyers instead of escrow companies.
Good Faith Estimate
Other closing costs may apply to your mortgage refinance. You should receive an estimate of closing costs in the Good Faith Estimate, GFE, which is required by law to be issued within three business days of a loan application. The final closing statement, or HUD-1, should largely agree with the fees disclosed on the GFE.
Low Cost Home Refinance
Some mortgage lenders offer to refinance with no closing costs or low closing costs. While these refinance deals can cut the amount of cash you need to provide at closing, you may end up paying a higher rate of interest to make up for the mortgage lender footing the bill.