Cost for refinancing your mortgage

Many homeowners love the idea of refinancing a mortgage to grab cash for both financial needs and wants. Sure, there may be some paperwork and costs involved, but the positives certainly seem to outweigh the negatives.

For instance, here are some pretty good reasons to refinance:

• Secure a lower interest rate
• Make a lower monthly payment
• Pay off your loan sooner
• Get rid of mortgage insurance
• Get cash from home equity, like with a home equity loan from Discover® Home Loans, to make home improvements, consolidate other high-interest debt or to finance a variety of other needs

All these advantages come with opportunities to save money, which you can then use to achieve your other financial goals.

However, you may not know all the factors that could influence a refinance like closing costs and other fees. Here's a breakdown to help you decide if refinancing is right for you.

Typical costs to refinance your home mortgage

There's no one typical or average cost to refinance your mortgage. Your closing costs will depend on the type of loan you want, your loan amount, where you live, the fees applicable to your loan, and whether you choose to pay discount points to lower your rate, among other factors.

Moreover, refinancing costs can vary widely. For example, an appraisal of a modest home in a small town might cost as little as $300, while an appraisal of a large or custom home in a major metropolitan area might cost $600 or more.

This checklist shows most of the refinance closing costs you may be charged:

• Loan application fee. Some lenders charge a nonrefundable upfront fee when you apply for a new mortgage. Loan application fees of $250 to $500 aren't unusual.
• Loan origination and documentation fees. Most lenders charge these or other similar fees to process your loan application and, if your loan is approved, close and fund it. These fees may total approximately 1 percent of your loan amount.
• Home appraisal fees. You may have to pay for an appraisal to refinance so your lender can determine whether you have enough equity to qualify for the loan you want. Appraisal fees are typically $300 to $450 for a single family home.
• Title search and insurance. A new title search and title insurance policy are usually required when you refinance. Fees vary, but $150 to $200 is the usual range for a title search, and it may cost around 1 percent of the total home price for title insurance.
• Flood certification fee. This fee enables your lender to determine whether your home is located in a federally designated flood zone. If it is, you may be required to purchase flood insurance as a condition of your loan. Expect to pay around $20 for flood certification.
• Recording fee. This governmental fee is typically required to record your new refinance mortgage in the public records.
• Discount points. Discount points are a type of prepaid interest that you can choose to pay upfront when you get a new loan to lower, or "buy down," your interest rate. One point equals 1 percent of your loan amount.