Last updated: March 11, 2024

Home Ownership

How much does it cost to refinance your mortgage?

Mother and daughter laughing in the kitchen that they remodeled with funds from refinancing their home

If you’ 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 your home equity with a cash out refinance

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

However, you may not know all the closing costs and other types of fees that could influence the overall cost of refinancing. 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 double that amount.

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 origination and documentation fees: Lenders typically charge these or other similar fees to process your loan application and, if your loan is approved, close and fund it.
  • 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.
  • Title search and insurance: A new title search and title insurance policy are usually required when you refinance. You may see fees for this vary depending on several factors.
  • Flood certification fee: This fee enables your lender to determine whether your home is in a federally designated flood zone. If it is, you may be required to purchase flood insurance as a condition of your loan.
  • Recording fee: This governmental fee is typically required to record your new refinance mortgage in 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.

When determining the overall cost of a mortgage refinance, it’s important to get information about these fees from your lender or by doing research on average costs in your area. These may help you to budget effectively and understand how much you may be able to save by refinancing.

When there are no costs for refinancing a mortgage

In some instances, borrowers complete a no-closing-cost refinance because they don't want to pay closing costs out of pocket.

Instead, the lender pays the closing costs or adds them to the loan amount. A loan with lender-paid closing costs typically will have a slightly higher rate.

Discover® Home Loans offers low fixed rates on mortgage refinancing with $0 application fees, $0 origination fees, $0 appraisal fees, and $0 costs due at closing.  

5 Tips to lower the cost for refinancing a mortgage

Whether you pay your closing costs in cash or choose a no closing costs refinance, you'll want to take advantage of opportunities to lower your costs to refinance.

Here are five strategies:

  1. Negotiate with your lender. Some lenders offer special promotions for homeowners who refinance. Ask your lender what the current offers are and if you're eligible.
  2. Shop around. Refinancing costs can vary, sometimes dramatically, from one lender to another. You should shop around and compare offers before you select a lender.
  3. Ask your lender to waive your appraisal. If you have a comfortable equity cushion and you're not taking cash out when you refinance, your lender may be able to waive your appraisal and rely instead on an automated valuation.
  4. Ask for a title policy discount. If you bought your home relatively recently, you may be able to pay a reduced fee to have your existing title policy reviewed and reissued.
  5. Ask for a streamlined refinance loan. If you have a government-backed mortgage loan and you want to refinance with the same type of loan, you may be eligible for a simplified, or "streamlined" refinance, which can involve lower closing costs.

Making the refinance decision

For many homeowners, a no-closing-cost refinance makes the “should I refinance?” question a no-brainer. With no closing costs, you can focus instead on whether refinancing will improve your financial situation and help you accomplish your goals.

It’s also fine to decide on a lender with closing costs, if you are armed with the numbers to understand your total cost to refinance and find options that are right for you.

The mortgage refinance calculator from Discover Home Loans can help you estimate how much lower your monthly payment might be if you refinance today.

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