Closing Costs and Other Fees to Refinance Your Home
Closing costs are key parts of refinancing a home. The closing costs generally include appraisal fees, credit fees, lender fees, points, taxes and insurance, escrow and title fees. Understanding those costs and factoring them into your decision will enable you to know if refinancing will be truly profitable or advantageous to you. If you do not factor in all the possible costs before you make a decision to refinance, you may end up paying more for your home by refinancing even if you may be getting a lower interest rate.
Closing Costs and Other Costs Definitions
- Application fee: You may be responsible for this fee even if your loan is denied. Average cost $75-$300.
- Loan origination fee: Charged by the lender for your refinanced (new) loan. Usually 0-1.5% of loan amount.
- Appraisal fee: This fee is charged to determine the current value of your home. You cannot get a loan for more than the appraised amount. Usually $400-$700 depending on your area. You can generally keep a copy of the appraisal, just ask your lender.
- Inspection fee(s): Depending on your location, you may be required to get a termite inspection, mold inspection, structural integrity inspection and so forth. These inspections will range anywhere from $200 to $500 each.
- Closing fees/attorney review: Depending on where you live, either an attorney or a title agency will be required to review all the documents and confirm they are legally prepared. Anticipate 500 to $1000.
- Prepayment penalty: Depending on the terms of your original mortgage, you may have a prepayment penalty due, which can be as much as 6 months worth of interest payments.
- Points: This is an optional fee paid to a lender in order to reduce the interest rate over the life of the loan.