Refinancing a mortgage to take advantage of a lower interest rate from Discover® Home Loans or another lender can be a great way to save yourself money, but be sure to include closing costs into your calculations to see if the refinance is absolutely worth it. Closing costs vary depending on the location and lender, so using a refinance calculator can be one of the best ways to estimate your refinance closing costs.
What are Refinance Closing Costs?
Refinancing closing costs are essentially the same types of fees associated with closing costs of any mortgage. The fees can include appraisals, underwriting fees, origination fees and more. Closing costs can vary by lender, and some lenders offer refinances with no closing costs.
How Much are Mortgage Refinancing Closing Costs?
In total, mortgage refinancing closing costs typically amount to a percentage of the home’s final purchase price. Depending on where you live and what lender you borrow from, you may also be required to pay escrowed property taxes.
Mortgage Points Explained
Also known as “discount points,” mortgage points are fees paid directly to the lender in order to lower the interest rate. This is also known as “buying down the rate.” In most cases, one mortgage point is equal to 1% of the total value of the loan.
Purchasing mortgage points in order to lower the interest rate can be a great way to save money in the long run, but you will pay more upfront. Always be sure to explore all of your options, including purchasing more mortgage points in order to lower your interest rate, making a larger down payment to decrease the time it will take to pay off the mortgage, and negotiating for the best win-win scenario possible.
How to Pay Less in Closing Costs
Be a Safe Borrower
Lenders will want to see a high credit score and/or a low debt-to-income ratio. The more you can present yourself as a safe borrower, the better offer you’re likely to get for your mortgage refinance.
Negotiate Lender Fees
You can ask for certain lender fees to be waived or reduced and compare fees and rates with competitors.
Work with the Same Title Insurance Company
If you use the same Title Insurance Policy, you can ask for a reissue rate, which will sometimes offer more competitive premiums than if you went with another company.
Choose a Lender with Zero Closing Costs
Some lenders may offer refinances with zero costs due at closing. While this benefit may be subject to certain restrictions, it is a good idea to compare lenders to see how they might help you find options that are right for you. For example, Discover Home Loans offers refinance options with zero cash due at closing in addition to low, fixed interest rates.
The Bottom Line
Refinancing closing costs are an important expense to plan for when considering a mortgage refinance. While small compared to the total loan amount, the fees can add up, and in some cases they can also be negotiated down. Always be sure to read the fine print and don’t hesitate to ask questions when you feel uncertain about terms, fees, or anything else.
About Discover Home Loans
Discover Home Loans provides home equity loans and mortgage refinance options with a range of benefits for qualified homeowners. Find options that fit within your budget at discover.com/home-loans. © 2023 Discover Bank, Member FDIC | NMLS ID 684042