What Is the Cost of Refinancing a Mortgage and Is It Worth It

What Is the Cost of Refinancing a Mortgage and Is It Worth It

Thinking about refinancing your home loan but not sure what you’ll actually pay to do it? Many homeowners ask the same question. What is the cost of refinancing a mortgage, and how do you know if it makes sense for your budget and long-term plans?

Let’s break it down so you can feel confident moving forward.

What Is the Cost of Refinancing a Mortgage Today

The cost of refinancing a mortgage includes more than just the interest rate. In most cases, you will pay several fees during the process. Some of the most common are:

• Application fees
• Home appraisal fees
• Title search and insurance
• Credit report fees
• Loan origination fees
• Closing costs

Altogether, the average refinance cost often lands between two and six percent of the total loan amount. That means if you refinance a $250,000 loan, you could pay anywhere from $5,000 to $15,000 just to close the deal.

What Is the Cost of Refinancing a Mortgage With Different Loans

Not all loans come with the same fees. What is the cost of refinancing a mortgage using an FHA or VA loan, for example, may be different from a conventional loan. Government-backed loans often come with limits on fees or reduced rates, but they may also require additional paperwork or insurance premiums.

Cash-out refinances tend to cost more than simple rate-and-term refinances. The added risk to the lender usually means more steps in the process and higher fees.

What Is the Cost of Refinancing a Mortgage Compared to the Savings

This is where things get interesting. Just knowing the average refinance cost is not enough. You also need to know when those costs are worth the return. To figure that out, many people use what’s called a break-even point.

Let’s say refinancing costs you $6,000, but it saves you $200 a month on your payment. You would make back your closing costs in 30 months. After that, the savings go straight into your pocket.

If you plan to move or sell the house before that break-even point, refinancing may not be the best option.

What Is the Cost of Refinancing a Mortgage and When Does It Make Sense

Start by looking at your goals. If your goal is to lower your monthly payment, switching from a 15-year loan to a 30-year loan might do the trick, but you’ll pay more in interest over time.

If you want to get rid of private mortgage insurance, refinancing might be a smart way to do it once you have enough equity in the home.

The key is to weigh your upfront costs against how long you plan to stay in the home and what kind of savings you’ll see month to month.

Reach Out to the Molly Dean Team Today

If you’re wondering what is the cost of refinancing a mortgage and whether it’s the right move for you, the Molly Dean Team is here to help. We’ve guided homeowners through thousands of successful refinances and can help you break down your costs, savings, and loan options with zero pressure.

Contact the Molly Dean Team today and let’s see if refinancing is the right step for you.