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How Much Cost To Refinance A Mortgage?

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Photo by MOHD AZRIN on Unsplash

Typical range to refinance mortgage costs: 2 to 6 percent of the loan amount

How Much Cost To Refinance A Mortgage?
Photo by MOHD AZRIN on Unsplash

Buying a home is one of the largest expenses many people will take on in their lifetime. Most buyers don’t have the cash to purchase a house outright, which means they will turn to mortgage lenders to help finance their home purchase. But since mortgages are long-term loans and interest rates can fluctuate over time, homeowners may find themselves wanting to refinance their mortgage with low-interest rates or a shorter loan term.

A mortgage refinance is essentially a new loan that replaces the old one for a better home mortgage. For that reason, the cost to refinance a mortgage can be high, with most homeowners paying between 2 and 6 percent of the total mortgage to refinance quotes. That means the actual cost will vary among homeowners, and the higher the loan amount, the more expensive it will be to refinance.

This guide will explain the factors that make up the cost to refinance a mortgage, the different types of refinancing options, the reasons for and benefits of refinancing, find the best online refinance to find the best home refinance offers, and the various ways borrowers can save, and the questions homeowners will want to ask their lender before refinancing.

Factors in Calculating the Cost to Refinance a Mortgage

How much does it cost to refinance a mortgage? The cost to refinance a mortgage loan will be different for every homeowner. However, there are certain factors that can help homeowners estimate how much they might pay in order to refinance their loans. These include the size of the loan, the homeowner’s credit score, the amount of equity they have in their home, the type of refinancing they choose, the loan term, the refinance fees, and the home’s geographic location.

Loan Size

The size of the loan will have a considerable impact on the total cost of refinancing. Using the typical range of 2 to 6 percent of the loan amount, closing costs for a $250,000 loan will range from $5,000 to $15,000. The cost to refinance a mortgage of $500,000 loan will be even higher, ranging from $10,000 to $30,000. For many homeowners, that is a significant amount of money, especially considering that the average home loan exceeded $450,000 as of February 2022.

Credit Score

As with any type of loan, customers with “good” or “excellent” credit scores will generally receive more favorable rates than those with “fair” or “poor” credit scores. A borrower with a credit score of at least 740 will typically see the lowest rates and costs to refinance, and customers with lower credit scores may have difficulty finding a lender that’s willing to approve their refinance application. For this reason, experts recommend that borrowers with lower credit scores work on increasing them before applying for a major loan like a mortgage broker or a refinance company.


Homeowners can build equity in their homes by making on-time payments for several years, or their home may increase in value and therefore increase their home equity. If the homeowner has enough equity in their home, they may qualify for a cash-out refinance, which puts a lump sum of cash out of the home’s equity into their hands to do with as they please. But taking equity from the home can increase the costs of a refinance because the resulting monthly payment may be higher than the original monthly mortgage payment.

Mortgage Term

The length of the mortgage loan, also known as the mortgage term, can also affect the total costs of refinancing. Homeowners who choose a shorter loan term when they refinance may have higher payments post-refinance than they did with their old loan. For example, a homeowner with a 30-year mortgage who refinances to a 15-year loan will likely have higher payments since they have less overall time to pay off the loan. However, refinancing to a shorter loan term will result in the homeowner paying much less interest on the loan over the life of the loan.

Refinance Type

While homeowners might assume that refinancing a mortgage is a straightforward process, there are actually several types of refinancing options to choose from, and each can come with different fees and interest rates. For example, the borrower may be offered a higher interest rate for a cash-out refinance than for a rate-and-term refinance because a cash-out refinance is a riskier type of loan. Homeowners may also have options for streamlining refinancing if their original mortgage loan was guaranteed by the Federal Housing Administration (FHA), the United States Department of Veterans Affairs (VA), or the United States Department of Agriculture (USDA). To determine the best type of refinancing for their individual situation, homeowners can speak with their lender.

Origination Fee

Most lenders will charge an origination fee for a mortgage refinance. This fee helps cover the costs of processing, underwriting, and closing the loan. The exact fee can vary, but it typically ranges between 0.5 percent and 1.5 percent of the loan amount. For a $250,000 loan amount, that equals between $1,250 and $3,750 for the origination fee alone. Borrowers may be able to negotiate origination fees with the lender in order to save money on the cost to refinance home loans.

Geographic Location

The geographic location of the home can have an effect on the cost of refinancing a mortgage. That’s because some areas with higher costs of living may have higher third-party fees or taxes, which can in turn increase the overall refinancing cost. Additionally, home prices are higher in some geographic areas, which can translate into higher closing costs on a home refinance.

Additional Costs and Considerations

In addition to the main cost factors, there are some other considerations that may affect the costs to refinance mortgage loans. These costs aren’t always applicable, so homeowners will need to check with their mortgage lenders to find out which ones they will need to pay. These potential costs include application fees, credit check fees, survey fees, attorney fees, title insurance, flood certification fees, and paying for mortgage points (more on this below).

Application Fees

Depending on the lender, the borrower may be required to pay an application fee when they first apply for loan refinancing. The application fee can vary from lender to lender, and the borrower is usually required to pay the fee even if their application is denied by the lender.

Credit Check Fee

Some lenders will cover the cost of credit checks, but if it falls on the borrower, the cost will likely be between $10 and $100. This allows the lender to check the borrower’s credit score and history to determine whether they are a good risk. The credit check fee may be included in the application fee, though for some lenders, this will be a separate charge.

Appraisal Fee

Before a mortgage lender will approve for refinance a mortgage application, they will need to determine the current property value. This helps the mortgage lender know whether the property’s value is higher or lower than the loan amount being requested. The best home value estimator sites can give homeowners a good starting point to determine what their house is worth, but the lender will require an official appraisal.

The appraisal fee will need to be paid by the homeowner, and it will typically cost between $300 and $500 (though the exact amount can depend on the appraiser and the home’s geographic location). Certain types of refinance loans may not require the borrower to pay an appraisal fee, so it’s important for borrowers to ask their lender whether an appraisal is required.

Survey Fee

While a survey is more common when first obtaining a mortgage than it is with a refinance, some lenders may require the borrower to pay a survey fee as part of the loan approval process. A professional surveyor will assess the property to determine its boundaries, easements, and elevation. A survey can cost the borrower between $375 and $745, with the average homeowner paying around $525.Attorney Fees

Some states require homeowners to utilize the services of an attorney to review and file their loan paperwork. If the borrower lives in a state that requires this, the resulting attorney fees will be added to the total cost of refinancing the mortgage. Attorney fees may be negotiable.

Title Insurance

Purchasing a title insurance policy can help protect the homeowner against any errors on the ownership records. Title insurance is typically calculated as part of the loan’s closing costs. Homeowners will likely pay $1,000 on average for title insurance, but they may be able to save money by sticking with the same title insurance company that they used for their original mortgage.

Flood Certification

Depending on the home’s location, homeowners may be required to pay a flood certification fee. This fee pays for a document that states whether or not the property is located within a designated flood zone. For properties within a flood zone, the homeowner will be required to purchase a flood insurance policy through the National Flood Insurance Program. Flood certification fees typically run between $15 and $25.

Mortgage Points

If available, mortgage points can help the borrower get a reduced interest rate and therefore lower the overall cost to refinance a mortgage. In general, each mortgage point equals 1 percent of the loan amount, and the more points the borrower buys, the lower the interest rate. For every mortgage point purchased, the borrower’s interest rate will fall by around 0.25 percent. Purchasing mortgage points increases the total closing cost amount but will decrease the loan’s interest rate, which can save the homeowner money over the term of the loan.

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