Learn How Much to Expect to Pay in Fees When You Refinance.
According to the Federal Reserve, it is not unusual to pay 3% to 6% of an outstanding principal in refinancing fees. These expenses are in addition to any prepayment penalties or other costs for paying off any mortgages the homeowner might have.
Refinancing fees vary from state to state and lender to lender. Here are some typical fees and average cost ranges you are most likely to pay when refinancing.
The table below, based on data from the Federal Reserve, summarizes fees homeowners may see in a mortgage refinance:
|Application||$75 to $300|
|Loan origination||0% to 1.5% of the loan principal|
|Points||0% to 3% of the loan principal|
|Appraisal||$300 to $700|
|Inspection||$175 to $350|
|Attorney review/closing*||$500 to $1,000|
|Homeowner’s insurance||$300 to $1,000|
|FHA, RDS, VA fees, PMI, or MIP*|| FHA = 1.5% plus ½% per year |
RDS = 1.75%
VA = 1.25% to 2%
PMI = 0.5% to 1.5%
MIP = 1.1% to 1.15% annually
|Title search and title insurance||$700 to $900|
|Survey*||$150 to $400|
|Prepayment penalty*||one to six months’ interest payments|
|* Optional or not applicable in all states.|
This charge covers the initial costs of processing your loan request and checking your credit report. If your loan is denied, you still may have to pay this fee.
Loan origination fee
The fee charged by the lender or broker to evaluate and prepare your mortgage loan.
A point is equal to 1% of the amount of a mortgage loan. There are two kinds of points you might pay. The first is loan-discount points, a one-time charge paid to reduce the interest rate of your loan. Second, some lenders and brokers also charge points to earn money on the loan. The number of points you are charged can be negotiated with the lender.
This fee pays for an appraisal of your home, in order to assure the lenders that the property is worth at least as much as the loan amount. Some lenders and brokers include the appraisal fee as part of the application fee. You are entitled to a copy of the appraisal, but you must ask the lender for it. If you are refinancing and you have had a recent appraisal, you can check to see if the lender will waive the requirement for a new appraisal.
The lender may require a termite inspection and an analysis of the structural condition of the property by a property inspector, engineer, or consultant. Lenders may require a septic system test and a water test to make sure the well and water system will maintain an adequate supply of water for the house. Your state may require additional, specific inspections (for example, pest inspections in southern states).
Attorney review/closing fee
The lender will usually charge you for fees paid to the lawyer or company that conducts the closing for the lender.
Your lender will require that you have a homeowner’s insurance policy (sometimes called hazard insurance) in effect at settlement. The policy protects against physical damage to the house by fire, wind, vandalism, and other causes covered by your policy. This policy insures that the lender’s investment will be protected even if the house is destroyed. With refinancing, you may only have to show that you have a policy in effect.
FHA, RDS, or VA fees or PMI
These fees may be required for loans insured by federal government housing programs, such as loans insured by the Federal Housing Administration (FHA) or the Rural Development Services (RDS) and loans guaranteed by the Department of Veterans Affairs (VA), as well as conventional loans insured by private mortgage insurance (PMI). Insured loans and guarantee programs generally apply if the amount you are borrowing is more than 80% of the value of the property. Both government and private mortgage insurance cover the lender’s risk that you will not make all the loan payments.
Title search and title insurance
This fee covers the cost of searching the property’s records to ensure that you are the rightful owner and to check for liens. Title insurance covers the lender against errors in the results of the title search. If a problem arises, the insurance covers the lender’s investment in your mortgage.
Lenders may require a survey to confirm the location of buildings and improvements on the land. Some lenders require a complete (and more costly) survey to ensure that the house and other structures are legally where you say they are. You may not have to pay this fee if a survey has been conducted for your property recently.
Some lenders charge a fee if you pay off your existing mortgage early. Loans insured or guaranteed by the federal government generally cannot include a prepayment penalty, and some lenders, such as federal credit unions, cannot include prepayment penalties. Also some states prohibit this fee.