Average Cost of a Mortgage Refinance: $3,398

Published Nov. 8, 2021
Lyle Daly
By: Lyle Daly

Our Research Expert

A homeowner stands in his kitchen and is on the phone with his loan servicer.

Image source: Getty Images.

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The average cost of a mortgage refinance is $3,398. Closing costs on a refinance depend on quite a few factors, including the mortgage lender, the location of the home, and the amount being refinanced. On average, homeowners can expect to spend about 1.3% of the loan amount in refinancing costs.

Keep reading for the latest numbers on mortgage refinances, including trends in 2021, the different costs involved, and how to get a better deal when you refinance.

Key findings

  • Average refinancing cost in 2020: $3,398
  • Average refinancing cost as a percentage of loan amount: 1.29%
  • Taxes make up nearly one-third ($1,111) of refinance costs.
  • Refinancing can include several types of fees, including an application fee, loan origination fee, and inspection fee.
  • The appraisal fee is the only fee that’s higher when refinancing ($530) compared to when purchasing a home ($519).

Average cost of a mortgage refinance: $3,398

The average cost of refinancing a mortgage is $3,398, according to ClosingCorp.

That amount includes an average tax bill of $1,111. Excluding taxes, mortgage refinances cost $2,287 on average. Those numbers are for 2020, the most recent full year with average mortgage refinance statistics available.

Over the first half of 2021, the average refinancing cost increased by 4.87% over 2020 (to $2,398).

Average percentage cost of a mortgage refinance: 1.29% of loan value

Refinancing costs vary heavily depending on the amount of the loan. In 2020, the average refinancing cost was 1.29% of the loan including taxes and 0.87% excluding taxes.

Both refinancing costs and closing costs on a mortgage are location-dependent. In some states, closing costs are less than 1% of the total loan amount on average. In others, they can be well over 4% of the loan amount. You can check averages for every state in our research on average closing costs.

No-closing-cost mortgage refinances

For homeowners who want to avoid putting down money to refinance, many lenders offer a no-closing-cost mortgage refinance. These are also called no-fee refinances.

This type of refinance doesn’t have upfront costs, but that doesn’t necessarily make it cheaper overall or mean that you're getting it fee-free. There are always costs for getting a mortgage or refinancing one, and lenders pass those costs on to the borrower. On a no-closing-cost refinance, the lender may simply add the fees to the amount of the loan or charge a higher interest rate.

Mortgage refinancing costs

A mortgage refinance can include various types of fees. In the table below, we've broken down these refinancing fees and how much they generally cost.

Fee Cost
Application fee $75–$300
Loan origination fee/underwriting fee 0.5%–1.5%
Credit check fee $25–$50
Appraisal fee $250–$700
Inspection fee $175–$500
Flood certification fee $15–$25
Survey fee $150–$500
Title search and insurance fee $400–$1,000
Closing fees $500–$1,000

Refinancing carries many of the same fees as purchasing a home does. For the most part, these fees are lower on average for a refinance than they are for a purchase.

The exception is the fee for home appraisals, which is slightly higher. Home appraisals cost an average of $530 for refinances and $519 for purchases in 2020.

But lenders also waived appraisal fees often on refinances. Urban Institute reported that 63% of rate/term refinances received appraisal waivers in August 2020, compared to just 10% of purchases.

Benefits of refinancing a mortgage

There are several reasons why you may want to refinance your mortgage. Here are the ways you can benefit from refinancing:

Reducing the interest rate: A lower interest rate can save you a considerable amount on your mortgage. If mortgage rates have dropped since you bought your home, or if you now have a better credit score, you may qualify for a lower interest rate when you refinance. It's worth keeping an eye on mortgage refinance rates to potentially get a better deal on your home loan.

Lowering the monthly payment: If your mortgage payment has become difficult to manage, a smaller payment amount could help. Refinancing is a way to lower your monthly payment. You could secure a lower payment if you refinance at a lower interest rate. Another option is extending the term of the loan for a smaller payment amount, although you generally pay more overall this way.

Going from an adjustable- to a fixed-rate mortgage: Adjustable-rate mortgages (ARMs) typically have lower starting interest rates than fixed-rate mortgages, but their rates can also go up and start costing you more money. To avoid this, you can refinance an ARM with a fixed-rate mortgage to get a stable rate.

Adjusting the payoff time: Depending on your financial needs, it could make sense to refinance and get a longer or shorter payoff time on your mortgage. For example, refinancing to a 15-year mortgage when you have 22 years left on your current loan would substantially lower your total mortgage costs, although it would likely raise your monthly payment. You could also do the opposite -- refinance to extend the length of your mortgage and pay less per month.

Get cash for your home equity: If you want to borrow money using your home equity, a cash-out refinance is one option. You essentially refinance for more than your current mortgage and pocket the difference. For example, if you have $150,000 left on your mortgage, you could refinance for $200,000, and the lender would give you the extra $50,000.

How much money can you save with a mortgage refinance?

One of the most common reasons for refinancing a mortgage is to save money by getting a lower interest rate. To demonstrate this, we can look at an example of how much you could save by refinancing a 30-year mortgage.

The table below compares the cost of sticking with a $240,000 mortgage originated 10 years ago at a fixed interest rate of 4.25% versus refinancing the remaining 20 years at an interest rate of 3.25%.

Factor Original mortgage Refinance
Term 30-year Remainder (20-year)
Interest rate 4.25% 3.25%
Monthly payment $1,180.66 $1,081.44
Refinance costs N/A $3,398
Breakeven time N/A 35 months
Total savings N/A $13,270.78

In the scenario above, refinancing makes your monthly payments more affordable and saves you quite a bit of money over the remainder of your loan.

It does, however, take nearly three years to break even on the refinancing costs. Before you refinance, it's important to consider how long you plan to keep your home. If you might sell in the near future, you may want to stick to your original mortgage or get a no-fee refinance to avoid thousands in upfront costs.

How to lower your mortgage refinancing costs

If you’re planning to refinance your mortgage, getting the best possible deal will maximize your savings. Here’s how to reduce the cost of your refinance:

  • Shop around: Compare rates with at least three of the best refinance lenders, including your current lender. See where you can get the lowest interest rate, monthly payment, and closing costs.
  • Build your credit: Your credit score plays a key role in your loan’s interest rate. Borrowers with a FICO® Score of 760 and above typically qualify for the lowest rates. If you’re not there yet, take steps to increase your credit score. Make sure to always pay your bills on time.
  • Consider buying points: Mortgage points allow you to pay cash upfront in exchange for a lower interest rate. It may be worth buying points if you have the money for it and you plan to own the home for a long time. By locking in a lower interest rate, you’ll save money over the life of the loan.
  • Ask for fee waivers: You may be able to get certain refinance fees waived. For example, many borrowers were able to get appraisal fee waivers in 2020. It doesn’t hurt to ask, and it could help you trim the cost of your refinance.

Sources

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.