How Much Does It Cost to Refinance a Mortgage?

By Bill Lyons | Published on January 6, 2025

Why Refinance a Mortgage?

Refinancing a mortgage can offer several advantages, depending on your current financial situation and goals. Here are a few reasons why homeowners might choose to refinance:

1. Interest rates have gone down: One of the most common reasons to refinance is to take advantage of lower interest rates. If market rates have dropped since you originally took out your mortgage, refinancing can help you secure a lower rate, potentially saving you money over the life of the loan.
2. Borrower has improved their financial profile: If your credit score or financial situation has improved since you first took out your mortgage, you may now qualify for better loan terms. Refinancing can help you secure a lower interest rate or reduce monthly payments, reflecting your improved financial standing.
3. Cash for other expenses: A cash-out refinance allows you to borrow more than your current mortgage balance and take the difference in cash. This can be a great option for consolidating debt, paying for large expenses like medical bills, or even funding home renovations. It’s a flexible way to tap into your home’s equity.
4. Shorten loan term: If you’re looking to pay off your mortgage faster, refinancing to a shorter loan term (such as from a 30-year to a 15-year mortgage) can help you achieve that goal. While your monthly payment may be higher, you can save money in interest over the life of the loan.
5. Switch from an ARM to a Fixed-Rate Mortgage: If you have an adjustable-rate mortgage (ARM) and are worried about rising interest rates, refinancing the ARM to a fixed-rate mortgage can provide stability. This way, your interest rate remains the same for the life of the loan, offering predictability in your monthly payments.
6. Refinance an investment property: Refinancing isn’t limited to primary residences. You can also refinance an investment property to take advantage of better rates, improve cash flow, or access equity for other investments. This option can help you optimize the performance of your rental or property portfolio.
7. Refinancing for home improvements: If you’re planning to renovate or make significant upgrades to your home, refinancing for home improvements can be a smart move. A cash-out refinance or a home equity loan can provide the funds you need to increase your home’s value and improve your living space.

No matter your reason, refinancing can be a strategic tool to improve your financial situation, save money, or meet your long-term goals.

How Much Does It Cost to Refinance a Mortgage?

Refinancing a mortgage typically costs between 2% to 6% of the loan amount, depending on various factors such as the type of loan, the lender, and the associated fees. These costs often include application fees, appraisal fees, title insurance, and other closing costs. For example, if you’re refinancing a $200,000 mortgage, you might pay anywhere from $4,000 to $12,000 in total costs.

However, if you have a government-backed mortgage, there are options that can significantly reduce the costs and time involved in refinancing. VA loans, FHA loans, and USDA loans offer streamline refinance programs. With streamline refinancing, the paperwork and processes are often simplified, and you may not need a home appraisal, which can save both time and money. These programs are designed to make refinancing more accessible and cost-effective for eligible homeowners.

Common Mortgage Refinancing Costs & Fees

When refinancing your mortgage, there are several costs and fees you’ll need to consider. These expenses can add up quickly, so it’s important to understand the financial commitment involved. Below are some of the most common refinancing costs and fees:

1. Application fees: Lenders may charge an application fee to cover the cost of processing your refinancing request. This fee typically ranges from $75 to $500, depending on the lender.
2. Appraisal fees: An appraisal is often required to determine the current value of your home. This can cost anywhere from $300 to $1,600, depending on the size and location of your home.
3. Title insurance & closing costs: Just like when you initially purchased your home, refinancing typically involves title insurance and closing costs. These costs can include attorney fees, title search fees, and other related charges.
4. Prepayment penalties: Some mortgages come with prepayment penalties if you pay off your loan early. This fee is designed to compensate the lender for the interest they would have earned had the loan remained active for its full term.
5. Discount points: If you choose to pay for discount points to reduce your interest rate, you can expect to pay around 1% of the loan amount for each point. This could be an option if you plan to stay in the home long-term and want to lower your monthly payments.
6. Survey fees: Some lenders may require a survey to verify the boundaries of your property, which could cost a few hundred dollars.
7. Homeowners insurance: Refinancing may require you to update your homeowners insurance policy. Depending on your provider and your coverage needs, this could result in additional costs.

When Is It Worth It to Refinance?

Refinancing a mortgage can be a smart financial move if it aligns with your goals. Here are some signs it might be the right time:

If interest rates have dropped since you took out your original mortgage, refinancing can help you lock in a lower rate and reduce your monthly payments. A small decrease in rates can lead to long-term savings, especially if you plan to stay in the home.

Refinancing to shorten your loan term, like moving from a 30-year to a 15-year mortgage, can save on interest and help you pay off the loan faster. While monthly payments may increase, the long-term savings can be significant.

If your credit score has improved, refinancing might allow you to secure better terms, such as a lower interest rate. Similarly, switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage offers stability, especially if you’re worried about future rate increases.

For those looking to access home equity, a cash-out refinance can provide funds for things like home improvements or debt consolidation, often at a lower rate than credit cards and personal loans.

Consider how long it takes to refinance, as it typically involves several weeks of processing. If you’ve built equity and have a favorable financial situation, refinancing could be worthwhile even if your current rate is competitive.

Lastly, for self-employed refinances, if your financial situation has improved, it may be a good time to explore better loan terms, despite the additional documentation requirements.

In these cases, refinancing could provide financial benefits, but it’s important to assess whether the savings outweigh the costs.

It is advisable to know what your breakeven is and how long you plan on being in the home. For example, if your closing costs are $10,000 and your monthly savings is $300 then you would breakeven after 33 months. If you’re only going to be in the home for two years, it may not make financial sense to refinance. But, if you will be in the home for 10 years or more, then the choice is obvious.

See If You Could Save Money By Refinancing

Refinancing your mortgage could be a smart way to save money, whether you’re looking to lower your interest rate, shorten your loan term, or access your home’s equity. If you’re weighing options like a home equity loan vs refinancing, it’s important to consider which option will give you the best financial advantage based on your needs. Refinancing can offer lower rates and monthly payments, or even help you consolidate debt or fund home improvements.

At Griffin Funding, we make the refinancing process simple and tailored to your unique situation. Our expert team is here to guide you every step of the way, ensuring you make the right choice for your financial future. We also offer tools like the Griffin Gold app, through which you can easily explore your options, get personalized refinancing advice, and even track your progress throughout the process.

Take the first step towards refinancing today!

Bill Lyons

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.