If you’re prepared to refinance your current mortgage for a better one, be sure to consider your estimated closing costs. Knowing the entire cost of refinancing your mortgage will enable you to determine whether you’re actually receiving the best possible deal.
So you’re considering a cash-out refinance, huh? That’s awesome! It’s a great way to tap into your home’s equity and get some extra cash for whatever you need, whether it’s home improvements, consolidating debt or just a little extra breathing room in your budget. But before you jump in, there’s one thing you need to know: closing costs.
Closing costs are the fees you pay to finalize your refinance loan They can vary depending on the lender, the loan amount, and other factors, but they typically range from 3% to 5% of the new loan amount. That means if you’re refinancing a $200,000 mortgage, you could be looking at closing costs anywhere from $6,000 to $10,000 Ouch!
But don’t worry, there are ways to minimize your closing costs. Here are a few tips:
- Shop around for the best lender. Different lenders have different closing cost policies, so it’s important to compare quotes from multiple lenders before you choose one.
- Ask about lender credits. Some lenders offer lender credits, which can help offset your closing costs. In exchange for a slightly higher interest rate, the lender will give you a credit that can be used to cover some or all of your closing costs.
- Roll your closing costs into your loan. This will increase your loan amount and your monthly payments, but it can be a good option if you don’t have the cash on hand to pay for closing costs upfront.
- Negotiate your closing costs. Don’t be afraid to negotiate with your lender on your closing costs. They may be willing to lower some of the fees, especially if you’re a good borrower with a good credit score.
So, how much should closing costs be on a cash-out refinance? It depends on a few factors, but you can expect them to be around 3% to 5% of the new loan amount. However, there are ways to minimize your closing costs, so don’t be afraid to shop around and negotiate.
Frequently Asked Questions
Q: What are closing costs?
A: Closing costs are the fees you pay to finalize your refinance loan. They can include things like the loan origination fee, appraisal fee, title insurance, and recording fees.
Q: How much do closing costs typically cost?
A: Closing costs typically range from 3% to 5% of the new loan amount.
Q: How can I minimize my closing costs?
A: There are a few ways to minimize your closing costs, such as shopping around for the best lender, asking about lender credits, rolling your closing costs into your loan, and negotiating your closing costs.
Q: Should I pay my closing costs upfront or roll them into my loan?
A: This depends on your financial situation. If you have the cash on hand, it may be better to pay your closing costs upfront. However, if you don’t have the cash, you can roll them into your loan. This will increase your loan amount and your monthly payments, but it can be a good option if you don’t have the cash on hand.
Additional Resources
- LendingTree: Understanding Mortgage Refinance Closing Costs
- The Mortgage Reports: Refinance Closing Costs | Typical Fees and How to Avoid Them
Cash-out refinancing can be a great way to tap into your home’s equity and get some extra cash, but it’s important to be aware of the closing costs involved. By shopping around for the best lender, asking about lender credits, rolling your closing costs into your loan, and negotiating your closing costs, you can minimize your closing costs and get the most out of your cash-out refinance.
How much are refinance closing costs?
You’ll typically pay mortgage refinance closing costs ranging from 2% to 6% of your loan amount, depending on the loan size. National average closing costs for a single-family home refinance were $2,375 without taxes or recording fees, according to 2021 data from ClosingCorp, a real estate data and technology provider. That’s an increase of $88 from the 2020 closing cost figures.
As was previously mentioned, some closing costs are regarded as “flat” or fixed fees, meaning they remain the same regardless of the amount of your loan. Others are percentage-based, meaning they’ll vary based on your loan amount.
Common fixed mortgage refinance closing costs
| Refinance cost | How much? |
|---|---|
| Loan application fee | $75 to $500 |
| Home appraisal | $225 to $700 |
| Credit report fee | $10 to $100 per person |
| Document preparation fee | $50 to $600 |
| Title search/insurance fee | $400 to $900 |
Loan application fee.
Lenders may charge this fee to start the mortgage application process. The actual fee amount varies by lender, and some banks require you to pay it up front. Some lenders will waive the fee once the loan process is complete. Most lenders, however, won’t refund the fee if they reject your application.
Home appraisal.
Many lenders order a home appraisal, whether you’re purchasing or refinancing a home. Banks can’t determine how much you can borrow until they know your home’s true market value. In some cases, however, you may not need an appraisal for your refinance.
Credit report fee.
Obtaining a copy of your credit report and scores is an expensive process, but before accepting your application, lenders want to see them. Lenders pull several different versions of your credit report, so prices will vary. They often use FICO credit scores.
Document preparation fee.
Your lender may charge this fee to create and send the documents you sign at closing.
Title search/insurance fee.
You’ll need a new lender’s title insurance policy when you refinance your mortgage. When refinancing, you can shop around for title insurance; just be sure to haggle over the title insurance costs to obtain the best possible deal.