If you’re considering refinancing your home loan, knowing the cost of refinancing a mortgage may assist your decision making.
Homeowners are typically responsible for paying closing costs during a refinance, although some lenders offer refinancing with fewer upfront fees.
On average, the cost to refinance a mortgage averages around $3,000, but the actual amount depends on the individual loan, closing costs and other variables. Typically, refinancing costs between 2% and 5% of your loan principal amount.
What’s included in the cost to refinance a mortgage?
In a home mortgage refinance, closing costs include several standard fees. Primary costs include:
- Lender fees: $1,000 or more
- Home appraisal: Between $450 and $650
- Title services: Between $1,200 and $1,500
Keep in mind, these are general numbers that vary based on your loan and county of residence.
Several other factors also affect the cost to refinance a mortgage. A higher loan amount increases title insurance cost. For a jumbo loan, the lender may require two home appraisals. Homeowners who opt to buy mortgage points to lower their interest rate also pay more at closing.
Before closing, lenders will give you a closing disclosure document. This contains all your loan information, including the exact amount due at closing.
Are the costs to refinance a mortgage worth it?
Many homeowners benefit financially from refinancing their home mortgage but deciding whether you should refinance depends on your individual circumstances.
Depending on current interest rates, your home loan terms and financial status, refinancing may lower your monthly mortgage payments or shorten the life of your home loan. Refinancing may also allow some homeowners to eliminate mortgage insurance.
Making the decision to refinance also depends on how long you plan on staying in your current home. If you might need to move to a different home in the next year or two and you refinance now, there’s a chance you won’t be in your home long enough to recoup the costs of refinancing.
Some lenders offer low-cost refinance options, check out what First Merchants option works best for you. But reduced closing costs generally result in a higher interest rate on your loan.
Use our home refinance calculator to help determine how much you could save on monthly mortgage payments by refinancing while interest rates remain low, and how long it’ll take to recoup closing costs. This can help you decide if the potential savings warrant the required costs to refinance a mortgage.
Want to discover more refinancing options? Call 1.800.205.3464 to speak to a First Merchants Bank loan expert today.
