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Published: Jan 04, 2024 7 min read

Mortgage refinance can help borrowers save money on interest and lower their monthly payments, but it’s important to understand all the associated costs to ensure it’s worth it.

Mortgage refinancing costs are similar to the closing costs you pay when you buy a house.

That’s because refinancing means replacing your current mortgage with a new home loan, often with an entirely new lender.

Borrowers who refinance have to foot the bill for loan underwriting fees, appraisal fees and title search fees, among other costs. These expenses can add up, so if your goal with refinancing is to save money, you should try to calculate if and when your savings from a lower interest rate will make up the cost of refinancing.

Here’s what you need to know about how much it will cost to refinance a mortgage:

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How much does it typically cost to refinance a mortgage?

The cost to refinance a mortgage is usually around 2% to 6% of the loan amount. That’s about the same as closing costs for a home purchase. The big difference is that a down payment isn’t necessary when you refinance because borrowers already have equity in their home.

To refinance a mortgage loan with a $150,000 mortgage balance, a homeowner could expect to pay between $3,000 and $9,000.

According to Freddie Mac, average refinance closing costs are about $5,000. But don’t put too much weight on this number: The cost to refinance your mortgage could be lower, or it could be a lot higher depending on the loan amount and other factors.

What are all the costs to refinance a mortgage?

Refinancing a mortgage involves more costs than you might think. Whether you’re considering a refinance now or just trying to get a sense of how much money you would need to do it in the future if rates fall, here are the main costs to have on your radar:

  • Loan origination fees: Usually 0.5% to 1% of the amount of your mortgage
  • Loan application fees: Usually a few hundred dollars
  • Title service fees: Includes a title search fee, title insurance and other costs
  • Cost of the home appraisal: Typically about $500
  • Other fees, if applicable: Examples include attorney fees, survey fees, credit report fees and government recording fees

Factors that affect how much mortgage refinancing costs

There are several factors that could influence how much you actually end up paying to refinance your mortgage. Here’s what to pay attention to:

Loan amount

Given that some parts of the refinance fees are charged as a percentage of your loan amount, you should expect to pay more for refinancing if your principal balance is high.

While some closing costs are flat, others like the origination fee, for example, are usually based on the loan amount.


With a good credit score, you will qualify for better interest rates, and you may also save money on refinancing costs. Mortgage lenders are more eager to work with loan applicants who have good credit, so they may offer you a lower origination fee if your profile is good. In addition to your credit score, lenders also consider your debt-to-income ratio.


Refinance closing costs depend on the home’s location. The cost of labor in the area affects the cost of pretty much every step of the mortgage refinance process. For example, appraisals to determine a home’s value tend to be more expensive in high-cost-of-living areas as well as remote areas where more travel is required.

Type of loan

Refinance closing costs may be slightly lower for government-backed loans compared to conventional loans. Government-backed loans include FHA loans, VA loans and USDA loans. Origination fees for VA loans, for example, can’t exceed 1% of the loan amount.

In addition to the loan type, the specific type of refinance can also affect the total costs. Streamline refinancing is usually cheaper, while a cash-out refinance can be more expensive than a typical refinance.

No-closing-cost refinancing is the cheapest option in terms of initial costs, but it’s important to understand that you will likely have a higher interest rate as a result, meaning you’ll have higher monthly mortgage payments. You’re not avoiding the refinance costs, you’re just not paying for them upfront.

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How can I save money on refinancing costs?

The most important thing you can do to save money on refinancing costs is to shop around with several different refinance lenders. In addition to comparing refinance rates, make sure to compare their origination fees, application fees and appraisal fees.

You can also try to ask your lender to waive or lower fees. This strategy may be a longshot, but it can be worth trying, especially if you have good credit and significant home equity.

Is refinancing a mortgage worth the cost?

As a general rule of thumb, refinancing a mortgage is worth the cost if your new interest rate will be at least 0.75 percentage points lower than your old rate. However, it’s best to use a refinance calculator or consult an expert to determine if the lower interest payments are worth the cost of refinancing in your particular situation.

If you have other goals with your refinance — like eliminating private mortgage insurance (PMI) or paying off your loan faster with a shorter term — you can still consider refinancing even if the interest rate savings are marginal relative to the cost of refinancing.

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FAQs about the cost of refinancing a mortgage

What is the average cost to refinance a mortgage?

The average cost to refinance a mortgage is about $5,000, but the cost varies significantly depending on factors including the loan balance that you’re refinancing.

Why does mortgage refinance cost so much?

Mortgage refinance is expensive because it’s similar to taking out a new loan on a home. You usually have to pay for a variety of costs and fees including loan origination fees, application fees, title service fees and appraisal fees.

When will I break even on the costs of a mortgage refinance?

The amount of time it will take to reach the break-even point depends on how much lower your new interest rate will be and how much your refinance costs total. You could break even in a matter of months with a great refinance deal, or it could take years. If you won’t break even at any point in the life of the loan, think hard about whether refinancing actually makes sense.
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