What Are Closing Costs For Refinancing?

So, what are refinance closing costs? These costs include lender and third-party fees people pay when getting their mortgages. When applying for a refinance, people must pay mortgage refinance closing costs just like they did on the original mortgage. 

You should understand that refinancing closing costs aren't fixed. You may pay a different amount depending on the state you live in, a loan amount, the loan program, the financial institution that issued a loan, whether you're cashing out your home equity, and other factors.

How Much Do You Pay For Refinancing Closing Costs?

Typically, mortgage refinancing closing costs are around 2% to 5% of the loan amount. In 2022, this figure is around $6,800 on average when purchasing a single-family home.

However, refinance closing costs depend on the loan amount, so expenses vary from loan to loan. The figure depends on your loan, your home's value, whether you're taking cash out, etc. 

Standard Refinance Closing Costs

The costs vary, but there is a list of a standard refinance costs that people must pay. Here's what you may expect:

• The origination loan fee. It makes up around 1%-1.5% of the loan amount.

• Title fees refinance. It includes a title search and insurance, costing around $300-$2,000 or more.

• Optional discount points. These costs make up around 0%-1% of the loan amount or more.

• Homeowners insurance and prepaid taxes. Costs depend on the state and other factors.

• Survey fee. Around $150-$400.

• Attorney fee. Around $500-$1,000.

• Recording fee. Costs depend on the location. Usually, these costs are around $25-$250.

• Home appraisal fee. Around $500-$1,000 and more. 

• Credit check fee. Typically, it costs $25.

• Application fee. Around $75-$300, depending on the financial institution.

• Processing or underwriting fees. Around $300-$900 each.

Note: these are the main refinance closing costs; there are many other expenses to cover. 

Is It Possible To Negotiate Closing Costs When Refinancing?

Yes, you can negotiate to refinance closing costs, especially in case of lender fees charged directly by your mortgage company. Here are some examples of costs that one can negotiate:

• Underwriting fees.

• Loan application fees.

• Loan origination fees.

• Homeowners' insurance premiums (when choosing more affordable policies and customizing coverage).

• Title insurance (when shopping for discounts and asking the title company to discard add-on fees for items like courier charges, etc.).

Unfortunately, some costs are non-negotiable and require paying in full. For instance, the loan officer is unlikely to lower fees charged by third parties. These third-party fees include survey, home appraisal, or recording fees. Lenders pass these fees to mortgage applicants who have to cover them. 

Consider getting several mortgage quotes from at least three lenders, including the current mortgage company. Once you have all quotes, compare loan estimates to spot the lowest costs solutions. 

Moreover, you can save more money by comparing interest rates and upfront fees. The aim is to find a lender with the cheapest loan origination, underwriting, or application fees.

Key Takeaways

So, what are the closing costs on a refinance? These are fees and costs related to replacing an existing mortgage balance with a new one. Typically, refinance closing costs consist of the same fees people pay when they first close their home loans.

As you now know, a unified formula or method to calculate refinancing fees does not exist. Some fees are flat and are identical across all states, and other fees depend on the financial institution, loan amount, state, etc. 

You should also remember that there are "recurring" closing costs that depend on normal homeownership expenses, for instance, property taxes and homeowners insurance, which are naturally different in each situation.

However, there is a list of a standard refinance closing costs that you can find in our article. Thus, you can calculate how much to save for refinancing closing costs on your mortgage. Moreover, you can negotiate some of the costs and save a significant sum of money.