The Average Cost to Refinance a Mortgage

A monopoly home that needs refinancing.

The average cost to refinance a home is three to six percent of the loan's value. In most situations, the same closing costs required to purchase the home are required to refinance it as well.

Significance

Each step in the process, from application to appraisal to underwriting to closing, requires an additional worker who needs to be paid. This is included in the closing costs of the loan.

Function

Closing costs also cover taxes on the loan, title insurance, and escrow balances as well.

Features

The closing costs for the mortgage refinance are detailed in the Good Faith Estimate and the APR (annual percentage rate) of the loan (which includes the monthly rate) and the total fees for a year are found on the Truth-in-Lending Statement. Both forms should be given to the borrower at application.

Considerations

Closing costs can be negotiated, especially the lender's fees. Taxes, however, are not negotiable.

Misconceptions

Loan modification is a different process than refinancing a loan. Loan modification is for borrowers in trouble, while a refinance is for borrowers that are still current on their mortgage.

References

• FederalReserve.gov: A Consumer's Guide to Mortgage Refinance
• HomeBuyingInstitute.com: Average Cost to Refinance a Home