How much does it cost to refinance a mortgage?How much does it cost to refinance your home? Learn how to estimate the expenses of a mortgage refinance. (iStock)Refinancing your home can save you a lot of money on interest if you can secure a lower mortgage rate or shorter repayment term. That being said, closing costs can add up quickly and may not always make refinancing worth it. So, how much does it cost to refinance? It depends. But you’ll need to account for closing costs, which can range between 2% and 5% of the total loan amount. Here’s a look at why people refinance their mortgage, what it generally costs, and how to lower some of your closing costs. You can easily compare personalized mortgage refinance rates on Credible. Why refinance your mortgage?How much does mortgage refinancing cost?Common mortgage refinancing feesHow to lower some closing costsCan you get a no-closing-cost refinance loan?How to know if refinancing is worth the costWhy refinance your mortgage?A few potential benefits that you stand to gain by refinancing your mortgage include:Lower your rateOne of the best reasons to refinance your mortgage is to secure a new, lower interest rate. Lowering your rate by a single percentage point can save you thousands of dollars in interest payments over the life of the loan. Refinancing generally isn’t worth it if it results in a higher interest rate.A lower interest rate may also lead to a lower mortgage payment, which can take some pressure off your monthly budget. If you improved your credit score since taking out your original home loan, you may qualify for a better interest rate. Change your loan termIf you choose to refinance to a shorter loan term, you can save even more money on interest. The fewer months you need to make a mortgage payment, the less you spend on interest. Just keep in mind that your monthly payment will likely go up if you shorten your repayment term.WHEN IS THE RIGHT TIME TO REFINANCE MY MORTGAGE?Switch your loan typeRefinancing also gives you the chance to change your loan type. If you have an adjustable-rate mortgage (ARM), you may find that switching to a fixed-rate mortgage makes repayment easier to manage since you’ll now have a consistent monthly payment. Switching to a fixed-rate mortgage also locks in your interest rate so it can’t fluctuate over the life of your loan. If you can secure a lower interest rate now by switching to a fixed-rate mortgage, it can potentially save you a lot over the years. Tap into your home equityA cash-out refinance lets you access the equity you’ve built in your home over the years. You can use that money to finance repairs, renovations, or to pay down other forms of debt — while potentially lowering your rate in the process. How much does mortgage refinancing cost?Mortgage refinancing costs vary, but you’ll need to pay closing costs such as a loan origination fee, appraisal fee, title fee, and underwriting fee. Refinance closing costs average $5,000 but can vary based on a variety of factors, according to Freddie Mac. Factors that affect closing costsSome of the factors that affect your closing costs include: Loan size — How large your loan is can affect closing costs. Refinancing closing costs generally cost 2% to 5% of the loan amount.Location — Both the state and county you live in can affect closing costs. Lender — All lenders charge different fees and varying amounts for those fees. It can be helpful to shop around for the best deal. Let’s look at an example of how much refinancing home loans can cost. Say you’re five years into a $400,000, 30-year mortgage. Your original home loan carries an interest rate of 5%, and you want to refinance into a new 30-year loan with a 3.5% interest rate. By refinancing into that lower rate, you could reduce your monthly payments by nearly $500 and potentially save more than $50,000 in interest over the life of the loan. Credible makes it easy to compare refinance rates from multiple lenders.Common mortgage refinancing feesIf you’re planning to refinance your mortgage, expect to pay closing costs. Some of the most common mortgage refinancing fees include:Loan origination fee — Lenders charge an origination fee to cover the costs of processing the mortgage loan. Loan origination fees cost about 0.5% to 1.5% of the loan amount.Mortgage points — Mortgage points are an optional fee that you can pay at closing to lower your interest rate. One mortgage point usually costs 1% of the total loan amount. Appraisal fee — You’ll need to have your home appraised when applying for a mortgage refinance so the lender knows the home is worth the amount it’s lending. Appraisal fees are paid to the appraiser and costs can vary based on location.How to lower some closing costsIf you’re on a budget, here are a few ways to lower the costs you’ll need to pay when refinancing: Shop around with multiple lenders. Spend some time comparison shopping with different lenders to see who charges the least amount of closing costs at the lowest rates. Pay down more of your loan. Closing costs usually come out to about 2% to 5% of the loan amount, so if you can afford to make some extra mortgage payments before refinancing, you can lower your closing costs.Ask for loyalty incentives. Some banks and credit unions offer incentives or rebates to existing customers who choose to bank and refinance with them. Ask your current bank if it’ll extend any discounts on closing costs or offer some other kind of financial incentive for sticking with them. Embrace tax deductions. Some closing costs can be deducted from your federal income taxes for the year you close on a mortgage loan. Ask your tax advisor about which deductions you may qualify for after refinancing. While you won’t directly save on closing costs, these deductions can lead to tax savings that balance out those costs. Can you get a no-closing-cost refinance loan?If you’re looking to avoid paying closing costs, you can try to pursue a no-closing-cost refinance loan. A no-closing-cost refinance won’t help you completely avoid closing costs, though. While you won’t need to pay closing fees at signing, your lender will add them to your new mortgage loan, and you’ll pay them along with the rest of your loan over time. Still, not having to pay closing costs up front can make refinancing more accessible if you’re on a tight budget. How to know if refinancing is worth the costWhen deciding if refinancing is worth the cost, consider these factors:You want to save on interestTo start, you need to secure a new loan with a lower interest rate for this move to make sense. After that, you need to confirm you’ll have the mortgage long enough to break even on those closing costs. It can take years to recoup closing costs, so if you think you might sell your home soon, refinancing doesn’t make a whole lot of sense. If you’ve recently improved your credit score, you may be able to secure a low enough interest rate for the closing costs to balance out. You want a lower monthly paymentIf you’re looking to lower your monthly payment, you can do that by refinancing to a lower interest rate or by lengthening your loan term. It’s worth noting that lengthening your loan repayment timeline can lead to spending more in interest, even though it might lower your monthly payments. Credible lets you compare mortgage refinance rates from various lenders in minutes.Source: Read Full Article Post navigationPrevious PostBit IRA Adds Several Tokens to Its List of OfferingsNext PostNo sign of Putin at summit as Chechen warlord vows to 'accelerate' Ukraine war03/06/2022 Economy Comments Off on How much does it cost to refinance a mortgage?