Cost to Refinance Home loan? Explained

Cost to Refinance Home loan?

Refinancing a home loan can be an excellent way to save money on monthly payments, lower interest rates, or change the terms of the loan. However, it’s important to understand that refinancing also comes with costs. In this article, we will explore the various expenses associated with refinancing a home loan.

Closing Costs

When refinancing a home loan, you will incur closing costs. These are fees charged by the lender to process and close the new loan. Closing costs typically range from 2% to 5% of the total loan amount. Some of the expenses that may be included in closing costs are:

  • Application fee
  • Appraisal fee
  • Credit report fee
  • Title search fee
  • Title insurance fee
  • Recording fee
  • Attorney fee
  • Prepaid interest
  • Points

It’s important to note that not all lenders charge the same fees, and some may offer to waive certain fees or cover them for you. It’s important to shop around and compare offers from different lenders to find the best deal.

Prepayment Penalty

Some home loans come with a prepayment penalty, which is a fee charged by the lender if you pay off the loan early. If your current loan has a prepayment penalty, you will need to factor in this cost when deciding whether to refinance. Make sure to check with your current lender to see if there are any prepayment penalties before starting the refinancing process.

Appraisal Fees

An appraisal is an evaluation of your home’s value. Lenders will require an appraisal to determine the amount of the loan they can offer you. The cost of an appraisal can range from a few hundred dollars to over a thousand dollars, depending on the size and location of the property.


Points are fees paid to the lender at closing in exchange for a lower interest rate. Each point is equal to 1% of the total loan amount. For example, if you are refinancing a $200,000 loan and pay one point, you will pay $2,000 upfront to the lender. The amount of points you will pay will depend on the lender and the terms of the loan.

Other Fees

There may be other fees associated with refinancing, such as fees for document preparation, notary services, or courier services. These fees may seem small, but they can add up quickly.



Refinancing a home loan can be a smart financial decision, but it’s important to understand the costs involved. Closing costs, prepayment penalties, appraisal fees, points, and other fees can all contribute to the overall cost of refinancing. Make sure to shop around and compare offers from different lenders to find the best deal for your situation.

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