What to Know About Refinance Closing Costs

Refinancing can save you thousands of dollars in interest, but don't forget to factor in your closing costs.

If you're thinking about refinancing your mortgage—especially into a 15-year fixed conventional loan—you’re likely focused on the interest rate and potential savings. But one important factor you shouldn’t overlook is refinance closing costs.

Understanding how refinance closing costs work can help you budget wisely, compare offers, and make sure your refinance truly pays off in the long run.

What Are Refinance Closing Costs?

Refinance closing costs are the fees and charges you pay when replacing your current mortgage with a new one. These costs cover the administrative, legal, and financial work required to process the new loan.

Much like the closing costs you pay when you buy a home, refinance closing costs are typically due at the time of closing, although some can be rolled into the loan amount if you prefer.

What’s Included in Refinance Closing Costs?

Refinance closing costs typically range from 2% to 6% of your loan amount. Here's a breakdown of common fees you may see on your Loan Estimate:

1. Loan Origination Fee

Charged by the lender for processing and underwriting the new mortgage. Usually 0.5% to 1% of the loan amount.

2. Appraisal Fee

A new home appraisal is often required to verify current market value, especially for conventional loans.

3. Credit Report Fee

Covers the cost of pulling your credit score to determine eligibility and rate.

4. Title Search and Title Insurance

Ensures the title is clear of liens and that you’re protected against potential claims.

5. Recording Fees

Charged by your county or municipality to officially record the new mortgage documents.

6. Attorney or Closing Fees

In some states or situations, you may need a real estate attorney or escrow service to close the refinance.

7. Prepaid Taxes and Insurance

If you're setting up a new escrow account, you’ll likely need to prepay property taxes and homeowners insurance.

How Much Are Closing Costs When Refinancing?

While costs vary by lender and location, here’s a general example based on a $250,000 refinance:

• Loan Origination: $1,250 – $2,500

• Appraisal: $400 – $700

• Title Services: $500 – $1,000

• Recording & Legal Fees: $100 – $500

• Prepaid Taxes & Insurance: Varies

  
  

Estimated Total: $5,000 – $10,000

This amount may seem significant, but if you're refinancing into a 15-year fixed-rate mortgage with a lower interest rate, the long-term savings can outweigh the upfront cost.

Can You Avoid or Reduce Refinance Closing Costs?

Yes, there are ways to reduce or eliminate some refinance closing costs, depending on your loan structure and lender incentives:

1. No-Closing-Cost Refinance

Some lenders offer a “no-closing-cost refinance” where fees are rolled into the loan or covered in exchange for a slightly higher interest rate.

2. Shop Multiple Lenders

Not all lenders charge the same fees. Comparing Loan Estimates can help you find the most competitive deal.

3. Negotiate Fees

Some third-party fees—like title services or origination charges—can be negotiated or waived.

4. Reuse Existing Title Insurance

In certain cases, you may not need new title insurance if you refinance with your current lender.

Are Refinance Closing Costs Worth It?

The key question is whether the interest savings from your new loan will outweigh the refinance costs over time.

If you're refinancing into a 15-year fixed conventional loan, you’ll likely benefit from:

• A lower interest rate

• Faster principal paydown

• Significant interest savings

  
  

In many cases, you’ll break even on the closing costs within a few years—and everything after that is pure savings.

Ask your lender for a break-even analysis to determine how long it will take for the refinance to pay for itself.

Final Thoughts: Plan Ahead for Refinance Costs

When refinancing your mortgage—especially into a 15-year fixed-rate loan—it's important to look at more than just the new interest rate. Understanding and planning for refinance closing costs will help you avoid surprises and ensure your decision is financially sound.

At Local Mortgage, we’re here to walk you through every step, compare options, and help you calculate the true value of refinancing.

How I Can Help You

When it comes time to purchase a home or refinance an existing loan, I want to help you! Hopefully articles like this give you good information and a better understanding of the mortgage world but let me use my experience and expertise to help you with your particular situation.

I tell my clients and referral partners that a mortgage transaction starts with a simple conversation. Let’s talk about your financial situation, budget, and goals so that I can help you determine the best solution for you. During a 10-minute informal conversation, we can get you on the right path as it relates to a home purchase or mortgage refinance.