Does it Cost to Refinance Your House/Mortgage? (Fee Breakdown)

07-12-2020 Home  »  Money  »  Does it Cost to Refinance Your House/Mortgage? (Fee Breakdown)


One question I get all the time is, “How much does it cost to refinance my house?”

So today I want to break down ALL of the costs and hidden fees that might not be super apparent once you start the refinance process.

Refinancing your home makes a TON of sense in some situations (not going to get into those situations in this blog) but it’s important to know the entire process from someone who does 100’s of refinance transactions every year.

Does it cost to do a refinance? Yes. No matter if you’re working with a super expensive lender like Quicken or you’re working with an independent mortgage broker like myself, there will always be some costs involved with a refinance.

EVEN IF IT MEANS THERE’S NO MONEY OUT OF POCKET FOR YOU.

You will always have title costs and some miscellaneous fees. No matter what.

So I want to break down an entire loan estimate, which is what you’ll get when you start the refinance process. Showing you ALL the fees that there can be on there and some that you should definitely look out for. Also not all lenders will send you a loan estimate right away, so make sure you ask for one or ask for what’s called a fee worksheet (which is really similar) before you get started.

Here’s an example of a loan estimate I pulled off Google.

The things you’ll want to double check real quick on the first page is the loan amount (make sure this amount isn’t significantly higher than what you currently owe, we’re talking like $5,000. If it’s more than $5k then what you currently owe then you already know you’re most likely getting screwed).

Then double check the interest rate to make sure it’s what you want.

Lastly, double check the monthly payment.

Once you double check those things, you can move to page two which is what outlines all the closing costs involved in your potential refinance.

The biggest thing you’ll want to drill down on immediately is the “Loan Costs” in Section A. This is typically the area where you can get screwed the most and it’ll really show you how much you’re paying for a refinance with the specific lender you’re working with.

Potentially you will see fees like Application fees, Underwriting fees, Processing fees, etc. Keep in mind those are all junk and just ways for a lender to make more money off you. One thing that’s pretty important in this section is discount points (if any at all).

A discount point is a type of prepaid interest or fee that you can pay to lower the interest rate from what par pricing is that day or that you can get a credit for.

It’s pretty standard to see something here as it’s not normal to have an exact interest rate that neither costs you or gives you a credit.

It’s important to make sure this isn’t absolutely insane. Typically if it’s under about .5% of the loan amount then you’re good.

Quicken on the other hand always tries to charge people a full percentage point and then some. Usually not worth it unless you see yourself being in the home with that specific loan for a long period of time.

But this section can make up a bulk of your refinance costs depending on which lender you’re working with. Again, Quicken and big banks like Wells Fargo = Expensive.

Here’s a refinance that I’m closing on for a client of mine tomorrow.

They wanted an exact rate so there weren't even any discount points for them. Literally $0 in loan costs which is awesome.

Moving on, you’ll get to Section B and you can’t really do much for these costs. These are things like an appraisal fee, credit report fee, flood certification, tax stuff, blah blah blah this is a boring section. Pretty much skip it.

You might want to look to see if you need an appraisal or not. I’d say about 50% of the time my clients don’t need an appraisal because if your loan officer that you work with is willing to put the time into your file, they can try to get what’s called an appraisal waiver. Which basically means you don’t need to get an appraisal done which saves you about $500-$600!

Again here’s the loan estimate for one of my clients. Pretty light.

Then we’ve got Section C which is title fees. Yes, you can shop around and try to save some money here but these costs are pretty standard across the board and they don’t fluctuate a ton. I try to use cheap title companies when I can but not much wiggle room here.

Same with Section E. Just ignore it. Standard stuff.

Then you work into Section F which is your prepaids.

I would tell you to completely ignore this section as well because here’s why:

Your current mortgage has an escrow account which is basically a bank account that has a bunch of prepaid property taxes and prepaid insurance payments just chilling there. So you make these payments monthly, but your insurance policy is due every 12 months and your taxes are due every 6 months. So once you make your mortgage payment each month, you pay a monthly portion of those into your escrow account.

Then every 6 months a large amount gets deducted for taxes and every 12 months, a large amount gets deducted for insurance. You never feel or see these payments though because it all happens through your escrow account.

So basically, when you refinance your home, your closing costs includes these taxes and insurance premiums or prepaids. The refinance, will start a completely new escrow account and the balance of your current escrow account will be refunded to you within 30 days after the closing of your refinance.

I treat this as a wash because it’s not really a cost if you were going to be paying those regardless of if you refinanced or not.

Same thing with section G.

I don’t really want to get into the weeds about how section G and section F are different because they basically do the same thing.

Then you’ll have section H which usually has nothing on it for refinances.

So realistically if you look at this entire page as a whole, you want to find out what specifically are your “costs”. Not total money needed for the refinance, but the actual “cost”. The things you are paying for specifically for this refinance. Then add up Section A, Section B, Section C, and Section E.

When I add up the costs on the loan estimate from my client it’s about $1,800 which is pretty standard. I’d say it usually fluctuates between 1%-2% of your new loan amount if you’re working with a cheaper lender. If you’re working with Quicken then all bets are off haha.

So bottom line, does it cost to refinance your home? Yes. It roughly costs you about 1%-2% of your new loan amount.

Most of the time you don’t see these or feel these costs because it gets rolled into your new loan amount so you don’t have to actually pay anything out of pocket. 1%-2% isn’t bad at all if you’re saving $100 or more in monthly payment because it pays for itself incredibly quickly plus if you’re working with a loan officer who’s good at their job, you can skip 2 months mortgage payments if closing is timed correctly.

That alone covers the “costs” of a refinance.

But that’s it for this blog! Hopefully you’re more informed about the potential costs involved with refinancing your home. This isn’t the most sexy topic I’ve done a blog on but if you have any other mortgage or lending specific questions, then you can head over to lending.shawnmalkou.com I’ve got lots of other good resources on there.







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About Shawn Malkou

He is the shawn-of-all-trades. Starting his entrepreneurship journey at the age of 14 with a dream and a single YouTube channel, he’s then since broken into countless industries. As the founder of Dream2Succeed, co-founder of DishTheDeal, co-founder of DirectionDesk, and lover of all things media – Shawn prides himself in picking up a new skill quickly to then share with others.

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Ready for the
next level?


Hi, I'm Shawn Malkou. I'm determined to help you succeed. My question is, are you ready?

Let's Do It