The Average Closing Costs for a Home Refinance

Closing costs for a refinance are similar to the costs for a home purchase.

Refinancing your home mortgage can allow you to change your mortgage to a lower interest rate with lower payments. Another reason to refinance is to cash out some of the equity that has built up in your home. If you are planning on refinancing your home mortgage, consider the costs of refinancing in relation to the savings.

Types of Closing Costs

The closing costs on a refinance mortgage are similar to the costs incurred to get a mortgage for a home purchase. Costs include loan origination fees, mortgage discount points, appraisal and credit check fees, mortgage insurance premiums and filing fees. One area where you might be able to save money is with title insurance. It may cost less to update your current title policy rather than pay for a new title insurance policy. Some fees and taxes may be specific to the government regulations in your local area.

Guide to Mortgage Refinancing

The U.S. Federal Reserve Board puts out a Consumer's Guide to Mortgage Refinancings (see Resources). The guide provides a list of the typical closing costs and a range of values for each item. Also included in the guide are mortgage shopping worksheets to compare the closing cost from different lenders. The guide states that typical closing costs are 3 to 6 percent of the refinance loan amount.

Bankrate Survey

Bankrate.com performs an annual survey of mortgage lenders to get representative closing costs for all 50 states. The website requests a good faith estimate from lenders in each state for the closing costs on a $200,000 mortgage. Not included in the estimates are mortgage discount points or mortgage insurance costs. For 2010, the average closing costs for the 50 states was $3,741. New York was the state with the highest costs at $5,623. Closing costs were lowest in Arkansas, coming in at $3,007. Forty of the 50 states had closing costs below $4,000.

Refinancing Considerations

Mortgage lenders can provide a good faith estimate of the closing costs for the size and type of mortgage loan you want. Compare the costs of several lenders and calculate how long it will take for the payment savings to repay the costs. If you have sufficient equity in your home, closing costs can be rolled into the new mortgage, allowing you to refinance with no out-of-pocket costs.

References

• Bankrate.com: 2010 Closing Cost Survey

Resources

• Federal Reserve Board: Consumer's Guide to Mortgage Refinancings