How much does it cost to refinance a house?

Refinancing replaces your existing mortgage with a new one—giving you the chance to take advantage of lower interest rates, improve your mortgage terms, or even pull cash out of your property for home improvements or debt consolidation. 

When done right, it can be a strategic path to long-term savings and improved cash flow. However—before jumping into the process—it's important to understand that refinancing isn't free. 

If you've wondered, "how much does it cost to refinance your home," you're not alone. The good news is that it's easy to break down the costs involved. 

How much does it cost to refinance a house?

When you refinance your mortgage, you're not just replacing one interest rate with another—you're also taking on a new set of fees and costs.

Typically, a mortgage refinance costs anywhere from 2% to 6% of the total loan amount. For example, if you're refinancing a $200,000 mortgage, a 3% closing cost would add roughly $6,000.

Here's a breakdown of common closing costs and an estimate of what you can expect to pay:

• Application fees: $75 to $500
• Origination fees: 0.5% and 1% of the total loan amount
• Appraisal fees: $300 to $800
• Credit report fees: $30 per applicant
• Title search and insurance: $700 to $1,000
• Attorney fees (if needed): $500 or higher
• Recording fee: $25 to $250

In addition to closing costs, you'll get a new interest rate tied to:

• Your credit score
• The type of refinance
• General market conditions

How much does it cost to refinance government-backed loans?

Refinancing a government-backed loan is generally more affordable than refinancing a conventional mortgage loan.

Government-backed loans don't typically require a new appraisal or great credit to qualify.

• FHA loan refinancing: You'll need to pay an upfront mortgage insurance premium (MIP) of 1.75% of the loan amount for both cash-out and streamline refinance options.
• VA loan refinancing: For Interest Rate Reduction Refinancing Loans (IRRRLs), the VA funding fee is typically 0.5%. For VA cash-out refinance loans, the fee usually falls between 2.15% and 3.3%.
• USDA loan refinancing: A USDA refinance requires an upfront guarantee fee of 1% of the loan amount. The USDA does not currently offer a cash-out refinance option.

Tips to lower the cost of a refinance

Here are ways to minimize your expenses:

Shop around

Don’t settle for the first offer that comes your way. Prequalify where you can and compare multiple offers to help you find the most affordable refinance lender.

Negotiate fees

It may not be commonly known, but many fees are negotiable. Ask your lender if they can waive or reduce certain costs, such as the application fee or title insurance. A small negotiation can sometimes lead to thousands of dollars in savings.

Consider no-closing-cost options

Some lenders offer no-closing-cost refinance options, where the fees are rolled into the loan balance or offset by a slightly higher interest rate. Although it can be convenient, compare the long-term costs versus the upfront savings to gauge whether it's worth it.

Improve your credit score

As with any loan, a higher credit score can set you up with the best interest rates and terms on the market—it can also put you in a better position to negotiate fees. Before applying for a refinance, boost your credit score by paying down debt, increasing income, or checking your credit reports for errors.

Refinance when rates are low

Timing is just as crucial to having a solid financial standing. Keep an eye on market trends and try to refinance during periods of low interest rates. Even a small drop in the rate market can make a big difference over the life of the loan.

Refinance alternatives

Home equity lines of credit 

A HELOC is a revolving line of credit secured by your home's equity. You can draw funds as you need during the draw period, where you'll be responsible for interest-only payments. Once the repayment period begins, the line of credit closes, and you'll be on the hook for principal-plus-interest loan payments. 

HELOCs tend to offer the most competitive rates on the market. However, it's important to consider that the rate will be variable, meaning your rate is not locked in, and monthly payments may fluctuate.

You can qualify with a credit score above 620, 20% equity, and sufficient income. 

Home equity loan

Unlike a HELOC, a home equity loan provides a lump sum of money in exchange for monthly payments at a fixed interest rate. Home equity loans typically have better rates compared to personal loans and credit cards—but not as favorable as HELOCs. Repayment term ranges from 10 to 30 years.

Homeowners need a credit score above 620, sufficient equity, and stable income to qualify. 

Home equity investment

Home equity investments (HEIs) allow you to tap into your home wealth without taking on debt or monthly payments. You get a single cash payout—up to $500K—in exchange for a percentage of the home’s future change in value. You can settle the investment anytime during a flexible 30-year term when you sell the home, refinance, or use another source of funds.

HEIs have less stringent requirements than most equity vehicles. You’ll need a credit score above 500, sufficient equity, and an eligible property—there are no income or debt-to-income ratio requirements. Prequalify with no impact on your credit here. 

Reverse mortgage

A reverse mortgage helps homeowners 62 and older convert their equity to cash without taking on monthly payments. Instead, the loan is settled when the borrower sells the home, moves out, or passes away. 

These financing tools are generally considered tricky and require due research before proceeding. Mainly because there are numerous conditional requirements you'll have to agree to throughout the life of the loan, and it can be challenging to pass down the home to heirs. 

To qualify, you'll need to own most of the equity in your property, be 62 or older, live in the home, and have enough income to cover maintenance, taxes, and insurance. 

Frequently asked questions

Is it expensive to refinance a house?

While closing costs and fees can add up—tacking on an extra 2% to 6% of the loan amount—the potential savings from a lower interest rate or better loan terms can far outweigh upfront expenses. Alternatively, if you can't secure a better or equal rate, you could end up paying thousands extra in interest in the long run—on top of refinancing fees. Consider using a refinance calculator to determine your break-even point.  

Who pays closing costs when refinancing?

Borrowers are generally on the hook for closing costs. However, most lenders will allow you to roll these fees into the new loan rather than pay upfront. In some cases, a lender may be willing to cover a small portion of the expense, so it's a good idea to ask.

Is it a good idea to refinance a house?

Ultimately, whether or not refinancing makes sense will depend on your current financial situation and long-term goals. Refinancing can be a great way to lower monthly payments, save thousands of dollars in interest, or get cash for other goals. However, you'll need a good credit score and sufficient income to qualify for a more favorable mortgage loan. Alternatively, if you plan to move in the near future or if the upfront costs are too high relative to your expected savings, refinancing might not be a good idea.

Final thoughts

Refinancing is not a one-size-fits-all solution, and what works best for one homeowner may not be ideal for another. As you evaluate your options, remember that every financial decision comes with trade-offs. If a refinance doesn't suit your current needs, you can’t afford higher monthly payments, or the loan will cost you more in the long run—consider waiting or exploring alternatives. Doing your homework will help you avoid surprises down the road.

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