The Cost to Refinance

Refinance closing costs can vary based on factors such as your loan amount and location. We'll go through some of the most common closing costs, as well as the importance of breaking even.

What are the costs of refinancing?

Refinancing a current mortgage, similar to that of a new home mortgage, comes with paying closing costs. Closing costs typically equal about 1 to 4% of your loan amount. For example, if your loan amount is $250,000, your closing costs could range from $2,500 to $10,000. The range depends on many factors, including loan-specific fees and your geographic location. Since refinancing is something you can plan for ahead of time, it's a good idea to set some money aside to cover these costs. If you don't have cash on hand, you might be able to roll the closing costs into your refinance mortgage. Talk to one of our mortgage representatives to see if this is an option for you.

Refinancing with closing costs in mind

If your goal in refinancing is to save money on your mortgage payment, it may be helpful to know your break-even point. This is the length of time it'll take for your new monthly savings to equal your refinance closing costs. This often takes a few years, depending on those costs and how much you save. In other words, if you plan on selling your home before you break even, it may not be worth refinancing.

You can calculate your break-even point by dividing your refinance costs by the amount you'll save each month with your lower mortgage payment.

For example, if your refinance costs total $5,000 and a refinance mortgage will save you $200 a month, your calculation would be:
$5,000 ÷ $200 = 25 months until you break even.

If you don't plan on staying in your house for that long, refinancing might not make sense in the long run.

Our refinance mortgage calculator can help you compare your current mortgage to a refinance loan, as well as show you your break-even point. Compare your options with our refinance calculator.

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