How Much Are Mortgage Refinance Closing Costs?
Closing costs are the fees you pay when your refinance closes. With 17 years of experience funding loans across the United States, I can tell you closing costs are the single most misunderstood part of a refinance. They are a normal part of the process, and understanding them helps you make a better decision.
What Do Closing Costs Include?
Here is a breakdown of the most common fees.
Lender fees. These may include an origination fee, underwriting fee, and processing fee. Not all lenders charge all of these.
Appraisal. The lender needs an appraisal to verify your home's value. This is usually a few hundred dollars.
Title fees. Title search and title insurance protect you and the lender against claims on the property. Costs vary by state and loan size.
Government fees. Recording fees and any transfer taxes required by your county or state.
Prepaid items. You may need to prepay property taxes, homeowners insurance, or set up a new escrow account.
Third-party fees. Credit report, flood certification, and survey fees if required.
How Much Should You Expect to Pay?
Total closing costs on a refinance typically range from 2 to 5 percent of your loan amount. The exact number depends on your state, your loan size, and your lender.
States with higher title insurance costs or transfer taxes will have higher closing costs. Larger loans tend to have higher total costs but lower costs as a percentage.
How Closing Costs Vary by State
This is where borrowers often get surprised. Two homeowners with identical loan amounts and credit scores can have closing costs that differ by thousands of dollars based purely on where the property is located. Here are the drivers I see in my state guides:
- High-cost states: New York, New Jersey, Maryland, and Washington state have significant transfer taxes and recording fees. A $400K refinance in New Jersey can cost $2,000 to $4,000 more than the same loan in a low-cost state.
- Attorney states: In South Carolina, Georgia, and parts of the Northeast, closing must be conducted by an attorney, which adds $500 to $1,500 in legal fees.
- Texas specifics: Texas cash-out refinances follow Texas 50(a)(6) rules, which cap fees at 2% of the loan amount (excluding certain third-party costs).
- Low-cost states: Indiana, Tennessee, and Utah generally have some of the lowest total closing costs because they have no or low transfer taxes and title insurance is promulgated or competitive.
- Title insurance variance: Some states like Florida and Texas have regulated (promulgated) title insurance rates, while others have a competitive market where shopping around helps.
If you want a state-by-state breakdown, check out my mortgage refinance closing costs by state guide.
Ways to Reduce Closing Costs
Shop around. Different lenders charge different fees. Comparing Loan Estimates from multiple lenders is the best way to find lower costs.
Negotiate. Some fees are negotiable. Ask your lender which ones can be reduced.
No-closing-cost option. Some lenders offer to cover your closing costs in exchange for a slightly higher rate. This can make sense if you are not sure how long you will stay in the home.
Lender credits. You can sometimes choose a slightly higher rate in exchange for a credit that covers some or all of your closing costs.
How Closing Costs Affect Your Decision
Always factor closing costs into your refinance break-even point calculation. Your monthly savings need to exceed the costs within a timeframe that makes sense for you.
Check your rate and see estimated closing costs at Lendtrain. You will get a clear picture of the total cost and potential savings.
Rate quotes are estimates based on the credit score you enter. Actual rates may differ based on verified credit, income, and property details. Lendtrain (NMLS# 1844873) is a licensed mortgage broker. Equal Housing Opportunity.