You Can Bank On Our Rates

The most local, national and online bank rates!

Refinancing: Breaking Down Closing Costs

For those of you thinking of refinancing you home loans, we've compiled a list of closing costs you'll likely be facing.

By sbup Staff

Closing costs, or settlement costs, can add up quickly when you’re refinancing a home. With so many fees, it can be hard for average consumers to know what’s fair. Here’s a primer on what types of costs you can expect to see when you close on a home loan refinance.

1.    Application Fee: Covers the cost of processing your initial loan application and checking your credit history. Either the lender or the broker can impose this fee.
Typical cost: $75 to $300.

2.    Loan Origination Fee: Covers the cost of the lender preparing the mortgage loan including document preparation. Most of this fee goes to the loan officer. The loan origination fee can be considered a point and is tax-deductible.
Typical cost: 1% of the loan amount.

3.    Points: Also known as the “loan discount” points buy down the interest rate so that monthly payments are lower. In general, one point buys down the rate by 0.25%. Points are only charged one-time and are tax-deductible in the year they are paid. In a refinance, points are often added to the loan amount to avoid upfront payment.
Typical cost: Each point costs 1% of the loan amount

4.    Appraisal Fee: This fee pays for an appraiser to determine the value of the home to make sure it is worth at least as much as the loan amount. This fee may be waived if there has been a recent appraisal on the property.
Typical cost: $300 to $700

5.    Closing/Settlement/Attorney fee: This is cost for the attorney or closing company the lender uses to conduct the closing.
Typical cost: $500 to $1,000

6.    Survey Fee. This fee covers the cost for the lender to verify that your home is legally where you say it is.
Typical cost: $150 to $400

7.    Homeowner’s Insurance. Also called hazard insurance, lenders require this because the home is the collateral for the loan. You probably already have adequate hazard insurance through your homeowner’s insurance policy when you refinance, but if not you may have to pre-pay at closing.
Typical cost: $300 to $1,000 depending on the value of the home.

8.    Private Mortgage Insurance (PMI). If you have less than 20% equity in the home and don’t have a piggyback loan, you’ll have to pay PMI to cover the lenders losses in case of a default. This can be paid up front with closing costs.
Typical cots: 0.5% to 1.5% of loan amount

9.    Title Search and Examination Fee. Covers the cost to have someone research the title of the home at the courthouse and analyze the title to make sure there aren’t any outstanding liens.
Typical cost: $150 to $225

10.    Title Insurance. Protects the lender if something was missed in the title search. An additional rider can be added to protect the homeowner as well.
Typical cost: 2.5% of loan amount for lender coverage, 3% for lender and homeowner coverage.

11.    Prepaid Interest. When you refinance, your first payment will not be due for 6 to 8 weeks, but you’ll have to pay interest for the remainder of the settlement month. If you close on the June 20th, for example, you’ll have to pay10 days of interest t closing.
Typical cost: Depends on loan amount, interest rate and date of closing.

12.    Prepayment Penalty. The fee paid to get out of your existing mortgage early. This fee is often prohibited by law, but is still applicable on some mortgages.
Typical cost: 1 to 6 months’ interest payments

13.    Mortgage Broker Fee. The commission paid to the mortgage broker if used to arrange the loan. This fee is usually higher for those with poor credit, but it is regulated by the government.
Typical cost: 1% to 5% of the loan amount.

Many of the closing costs of a loan vary between lenders. Shop around for the best deals. You are entitled to receive a “good faith estimate” of closing costs prior to closing. Examine the costs carefully and ask for an explanation of unusual fees. It’s common to negotiate closing costs particularly application, loan origination and appraisal fees.

Typical costs derived from Federal Reserve estimates.

Savings Center
Sponsored by

green arrow NEW: Insurance Center

green arrowFinancial Resources

CalculatorCalculators: Access to our Savings, Mortgage, Auto Loan and Personal Finance Tools.