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Understanding the costs of refinancing

Refinancing can save you hundreds of dollars per month, but it's important to understand all the associated costs and long-term impacts.

As with any big financial endeavor, it’s highly recommended that you do your homework, ask questions and look carefully at your short- and long-term goals before deciding to refinance. You’ll want to work closely with your lender to do a cost-benefit analysis and determine whether refinancing makes sense for you.

The costs

The average closing costs on a refinance are approximately $5,000. The size of your loan and the state and county where you live will play big roles in how much you pay. These costs are very similar to what you paid when you purchased your home, including your loan origination fee and the following:

  1. Government recording costs
  2. Appraisal fees
  3. Credit report fees
  4. Lender origination fees
  5. Title services
  6. Tax service fees
  7. Survey fees
  8. Attorney fees
  9. Underwriting fees

If your lender offers you a “no-cost refinance,” keep in mind there is no such thing as a free loan. They are probably charging a higher interest rate and rolling the closing costs into the loan — likely costing you more over the life of the loan.

If you plan on buying discount points to buy down your mortgage rate you’ll have to pay for that upfront. Buying discount points can save you money over the life of the loan, but whether it makes sense depends on your personal situation. Use our paying points calculator to see how paying extra points might lower your rate.

Remember, you can refinance through your existing lender or a new lender. It’s highly recommended that you interview several lenders to compare their rates and terms in the Loan Estimate and select the loan that works best for you.

Tools and Resources

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Calculator: Closing Costs

Estimate what your closing costs might be.

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Calculator: Refinancing Costs

Understand what your refinancing costs might be.

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Calculator: Paying Discount Points

See how paying extra discounts might lower your mortgage rate.

Options for refinancing