How much does it cost to refinance your mortgage?

Mother and daughter laughing in the kitchen that they remodeled with funds from refinancing their home

Refinancing a mortgage often involves costs and paperwork. However, there may be some good reasons to refinance, such as:

Securing a lower interest rate
Making a lower monthly payment
Paying off your loan sooner
Getting rid of private mortgage insurance (PMI)
Getting cash from your home equity with a cash out refinance

These potential advantages may help you achieve your financial goals.

Here's a breakdown of some of the typical costs of a mortgage refinance to help you decide if this option is right for you.

Common costs of refinancing your mortgage

The cost of refinancing your mortgage may depend on factors such as the type of loan you want, your loan amount, where you live, and the fees applicable to your loan. Ultimately, refinancing costs can vary widely. Some lenders may not charge any fees at all.

This checklist shows some of the costs you may be charged:

Loan application fee: Some lenders charge a fee when you apply for a new mortgage.
Loan origination and documentation fees: Lenders may charge these fees to process your loan application and cover administrative expenses.
Home appraisal fees: You may have to pay for an appraisal if your lender wants to determine the value of your home.
Title search and insurance: Your lender may charge you for a title search to ensure there are no legal problems with your home and for a title insurance policy that protects you against any ownership disputes.
Flood certification fee: This fee enables your lender or a third party to determine whether your home is in a. Special Flood Hazard Area (SFHA), which is determined by the Federal Emergency Management Agency (FEMA). If your home is in a SFHA, you may be required to purchase flood insurance as a condition of your loan.
Recording fee: This fee, charged by a state or local government agency, is typically required to enter your new mortgage in public records.
Discount points: You may be able to pay for discount points to lower your interest rate when you get a new Mortgage. Typically, one point equals 1% of your loan amount.

When determining the overall cost of your mortgage refinance, you should understand any fees charged by your lender.

When there are no costs for refinancing a mortgage

In some instances, a borrower may not pay any refinancing costs out of pocket. For example, the lender may add them to the loan amount.

Typically, a lender will increase the loan amount to cover costs that a borrower doesn’t pay out of pocket.

Discover® Home Loans offers low fixed rates on mortgage refinancing with $0 application fees, $0 origination fees, $0 appraisal fees, and $0 costs due at closing.

5 tips to lower the cost of refinancing a mortgage

Here are some ways to potentially lower mortgage refinancing costs:

Ask a lender about offers. Some lenders may have special promotions, such as reduced or no upfront refinancing costs. Ask a lender about their current offers and if you're eligible.
Shop around. Refinancing costs can vary, sometimes dramatically, from one lender to another. Shop around and compare offers before selecting a lender.
Ask your lender to waive the appraisal. In some circumstances, your lender may be able to waive your appraisal and carry out an automated valuation. This may be cheaper because a professional appraiser doesn’t have to visit your home and conduct a physical inspection.
Ask for a title policy discount. If you bought your home relatively recently, you may be able to pay a reduced fee to have your existing title policy reviewed and reissued.
Ask for a streamlined refinance loan. You may be eligible for a "streamlined" refinance, which typically comes with lower costs than a traditional refinance.

Discover Home Loans offers mortgage refinance products but does not offer streamline refinance options.

Deciding whether to refinance your mortgage

Reducing or eliminating different refinancing costs may help you achieve your financial goals. Research different lenders on the market and compare costs and loan terms.

This mortgage refinance calculator from Discover Home Loans can help you estimate how much lower your monthly payment may be if you refinance.

Main: The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover Bank or its affiliates.