Even when rates plummet, the costs of refinancing can add up to an amount that cancels out any savings – or worse, costs you money. Consider these common refinancing fees and expenses:
This is a fee the lender charges to pull together all of the documents needed for the application process.
Loan origination fee:
This is the fee charged by the lender for the work put into reviewing and approving your application and then creating the documents for the new loan.
Lenders usually want a fresh title search done for a refinance to confirm that you legally own your home and that there are no liens on it. This fee can range from a few hundred dollars to more than $600 and often includes title insurance, which covers the lender and you against financial losses due to mistakes or other issues that could arise in the future in relation to your title.
When you refinance, the lender will want a current appraisal of your home to ensure that it is valued at or above the amount you are borrowing. This fee can range widely but is usually more than $100 and less than $1,000.
Your refinance lender will check your credit report and pass the fee for doing so onto you. It is usually around $30 and may be a part of your application fee or loan-origination fee.
You probably already have enough homeowner’s insurance to satisfy your lender that your house – now the collateral on the refinance loan – is properly protected. If you don’t though, you may have to pay extra at closing, up to $1,000.
You can choose to “buy” points on your refinance interest rate to make it, and therefore your monthly payments, lower. When you do this, you can pay them upfront during the closing process (and they are tax deductible) or add them to the total loan amount.