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How Much Does It Cost to Refinance a Mortgage?

Updated on:
Content was accurate at the time of publication.

You could save thousands of dollars by refinancing your mortgage — but just like a new home loan, a refinance comes with closing costs that could affect your short- and long-term finances.

The cost to refinance a mortgage ranges from 2% to 6% of your loan amount, and you can expect to pay less to close on a refinance than on a comparable purchase loan. The exact amount you’ll have to pay depends on several factors, including:

  • Your loan size
  • Your lender
  • Your location
  • Your credit score
  • Your available home equity
  • Your loan term
  • Mortgage type (fixed- vs adjustable-rate)
  • Mortgage program
  • Property type
  • Occupancy type

Before refinancing, consider how much you’ll pay in closing costs versus how much you could save over time.

Common mortgage refinance fees

The table below breaks down some of the typical costs associated with a refinance.

Type of feeAmount
Application fee$75 to $500
Origination feeUp to 1.5% of loan amount
Credit report fee$10 to $100 per applicant
Document preparation fee$50 to $600
Home appraisal$225 to $700
Home inspection$300 to $500
Flood certification fee$15 to $25
Title search and insurance fee$400 to $900
Recording fee$25 to $250
Reconveyance fee$50 to $65
Mortgage insuranceConventional loans:
0.15% to 1.95% of the loan amount annually
FHA loans:
1.75% upfront premium
0.15% to 0.75% of the loan amount annually
VA loans:
0.5% to 3.6% for upfront VA funding fee
USDA loans:
1% upfront guarantee fee
0.35% annual guarantee fee

When is it worth it to refinance?

Before you go through a refinance, you want to make sure it actually makes sense for your financial situation. To do so, calculate your “break-even point” to ensure the refinance benefit is worth the costs you’ll pay. The calculation is easy: Divide your total refinance closing costs by your estimated monthly savings. The result is the number of months you’d need to stay in your home to recoup the costs.

For example, let’s say you can save $200 per month with a refinance that costs you $5,000. When you divide the $5,000 closing costs by the $200 monthly savings, the result is 25. If you stay in your home for at least 25 months — just over two years — the refinance makes sense.

5 reasons to refinance your mortgage

There are several reasons to consider a mortgage refinance:

1. Lower your interest rateA loan with a lower mortgage rate reduces your monthly mortgage payment and lifetime interest costs. If your credit history has improved since you took out your current loan, you could refinance and get a lower rate. Your monthly savings amount depends on your new rate and the cost to refinance into a new loan. Use a refinance calculator to help you better estimate your bottom line.

2. Change your loan termYou can pay off your mortgage earlier with a shorter term or stretch out your term to get a lower monthly payment. There are trade-offs involved in either choice. Refinancing from a 30-year to a 15-year mortgage could help you lock in a lower rate and save on interest costs, as long as you can afford a much higher monthly payment. Extending your loan term, on the other hand, would lower your monthly payment but cost you more in interest over the life of your loan.

3. Tap your home equityWith a cash-out refinance, you can improve your loan terms and access your available home equity at the same time. You’ll take out a new mortgage for a larger amount than you currently owe and pocket the difference in cash to accomplish other financial goals, like making home improvements or covering college costs. Use our cash-out refinance calculator to crunch the numbers and determine whether this option makes sense.

  Additional fees for cash-out refinances in 2023

Beginning May 1, 2023, conventional loan borrowers taking out cash when they refinance will face higher interest rates or an extra fee at closing. The fee will range from 0.375% to 5.125% of the loan amount.

4. Convert an ARM to a fixed-rate mortgageAn adjustable-rate mortgage (ARM) is a loan that has a low, initial fixed rate for the first few years and then changes based on the terms of the ARM you choose. A portion of your ARM payment is based on an “index,” a benchmark rate that fluctuates based on market factors. If rates spike over time, the index could make your payment unaffordable. Converting your ARM to a fixed-rate loan gives you the stability of a predictable monthly payment.

  Additional fees on ARMs in 2023

Conventional loan borrowers who choose adjustable-rate refinance loans will also have to pay higher interest rates or added closing costs beginning May 1, 2023. The extra cost will apply to those borrowing more than 90% of their home’s value and will be 0.25% of the loan amount.

5. Convert an FHA loan to a conventional loanIf you have a loan backed by the Federal Housing Administration (FHA) and made anything less than a 10% down payment at closing, you’ll pay mortgage insurance premiums for the life of your loan — unless you refinance into a conventional loan. If you have at least 20% equity when you refinance, you won’t pay private mortgage insurance costs on your new loan.

4 steps to lower your refinance costs

STEP 1 Improve your credit scoreA credit score of at least 780 will typically get you the lowest rate and costs and may even make the refinance approval process easier. To boost your score, pay your bills on time, shrink your credit card balances and dispute any credit report errors you find.

STEP 2 Shop around with multiple lendersYou won’t know whether you’re getting the best refinance rates possible if you don’t comparison shop. Apply for a loan with three to five lenders and compare their refinance fees.

STEP 3 Negotiate your refi costsDon’t be afraid to ask for a better deal. You can negotiate some of the fees associated with refinancing — a lender might reduce or waive some fees, especially application or origination fees. And, because appraisals are no longer the default option, you may be able to get an appraisal waiver or choose a cheaper type of valuation process.

STEP 4 Consider a no-closing-cost refiIf you don’t have the cash to pay the full cost to refinance your mortgage up front, ask your lender about a no-closing-cost refinance option. Don’t be fooled by the name though — your lender will either charge you a higher interest rate or add the closing costs to your new loan balance, which spreads your closing costs payment over your loan’s term.

Mortgage refi rates trends

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If you’re struggling to choose a refinance lender, check out our picks for the best mortgage refinance companies.

Today's Refinance Rates

  • 7.25%
  • 6.88%
  • 7.72%
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