Compare Closing Costs and Negotiate When Refinancing

Refinancing? Watch These Closing Costs

Refinancing to take advantage of low interest rates? Refinancing can be a smart way to reduce debt, but it is important to keep an eagle eye on closing costs during the process. Closing costs can average between 2 to 6 percent of the cost of the property—a hefty burden when your overall goal is to get out of debt. By comparing fees thoroughly, you can see how your loan options stack up.

5 Fees to Watch When Refinancing

You are likely to encounter these fees as you refinance. Be aware that some are non-refundable if you do not complete the loan process.

  1. Application charge: The fee to process your loan request, including a credit check. This can range from $75 to $300, and you may still need to pay even if refinancing is denied.
  2. Appraisal fee: Covers the cost of appraising your home to ensure it meets loan value requirements. Appraisals typically range from $300 to $700.
  3. Inspection fee: Some lenders require a home inspection for termites and structural soundness. Costs can range from $175 to $400.
  4. Loan origination fee: This fee includes evaluating and processing your loan. It may be negotiable and can be up to 1.5% of the loan principal.
  5. Points: One point equals 1% of your mortgage amount. Paying points—known as loan-discount points—can reduce your interest rate. These are negotiable with your lender.

Use the Good Faith Estimate to Compare Loan Offers

After submitting your mortgage application, you should receive a Good Faith Estimate (GFE). This document outlines the key loan details to help you compare offers. Understanding the total loan cost allows for a well-informed decision—don’t hesitate to ask your lender questions.

If refinancing to lower debt is the right decision for you, contain costs by shopping around for services and negotiating lower fees. This strategy supports your financial goal of reducing debt.

About the Author

Julie Bawden-Davis is a Southern-California-based writer specializing in personal finance and insurance. Since 1983, her work has appeared in publications including Family Circle, Ladies’ Home Journal, Parenting, Entrepreneur, and The Los Angeles Times.

Julie Bawden-Davis

Julie Bawden-Davis is a bestselling journalist, novelist, blogger, and YouTuber. A prolific author, Julie writes in several genres. She enjoys creating page-turning suspense served up with a dose of romance, garden books that turn any brown thumb green, and spiritual books meant to enlighten and inspire. Widely published, Julie has written 45 books and more than 4,000 articles for a wide variety of national and international publications. She lives in Southern California, where she enjoys sunny, blue skies most days and year-round gardening. Julie gains inspiration from being surrounded by plants when she writes.