Refinance Closing Costs: No Money Out of Pocket



2020 has been hailed as the magical year to refinance your mortgage. Interest rates have been in the 2s for the entire year. Since the pandemic began, people have been taking a good hard look at their assets and how they can leverage their equity to maintain their financial stability.


Housing has always been the bedrock of the economy—it’s why we were hit so hard when the crash of ‘08 happened. But ever since Fannie Mae and Freddie Mac were taken under the government’s wing, business has been booming.


In 2021, housing is still going to be the economy’s bright North star, leading the way with purchase loans and refis. But as common as refis have become, I still get clients asking me about closing costs.


What are Refinance Closing Costs?


There are a variety of fees that come with buying a home, and the same goes for refinancing. When you refinance your mortgage, your lender pays off your old mortgage and issues you a new loan. This loan has a lower interest rate. It’s always preferable to have a loan with a lower interest rate, it’s the whole reason behind refinancing!

Refinance closing costs tend to be about 2% to 6% of the loan amount, and they pay for:

  • loan origination fees

  • credit fees

  • appraisal fees

  • points (which is an optional expense to lower the interest rate over the life of the loan), insurance and taxes

  • escrow and title fees

  • and lender fees

On average, refinance closing costs are less than purchasing closing costs. When you refinance you’ve already paid off a portion of your loan. Even so, the average closing costs for a home refinance can cost anywhere from $3,000 to $6,000.


Closing Costs Can Be Added to Your Loan


Rather than paying closing costs at the end of your refinance, ask your lender if they can roll costs into your loan. While it’s cheaper to pay closing costs at closing, not everyone has that kind of money lying around.


If you’re thinking about refinancing, you’re probably up at night Googling articles on how to save money, not spend more of it. 2020 has made people evaluate their bank accounts and shore up their financial defenses, so if closing costs make a huge difference in terms of affordability, then ask your lender to roll it into the cost of your loan. While your closing costs will have your mortgage interest rate tacked onto it, you’ll still be able to refinance and pay a lower monthly mortgage payment than before.


Refinancing Can Help Restructure Your Budget


By rolling your closing costs into your newly refinanced loan, you’ll be able to think bigger! It’s no secret that owning has always been cheaper than renting, but refinancing is even cheaper than owning. It’s the 2.0 of owning a home. The best part is that you can refinance multiple times over the life of your loan.


Remember that home loans were meant to make your life easier. Just like how you’ll grow and change according to life's curveballs—your home loan will do the same. All you have to do is make sure you have a good Rate Leaf broker who can help guide you throughout the loan process. Not all brokers are made equally. You want to make sure that you’re teaming up with a company that’s transparent about their process, You need a team who's direct and prompt when communicating with clients. Not to mention meticulous enough to care enough about even the smallest details about your loan. After all, the point of refinancing is so that you can go home knowing that your finances have been made leaner for the better.