How Much Does Refinancing a Mortgage Cost?

If you bought your home when interest rates were high (or when you didn't have the best credit score), refinancing might be on your radar. But before you commit, it's worth understanding what you're actually paying for. Refinancing costs money — and knowing those costs upfront helps you decide whether the math works in your favor.

What does it cost to refinance a mortgage?

Refinancing closing costs typically run between 2% and 5% of the loan amount. On a $300,000 loan, that's $6,000 to $15,000. These costs include lender fees, title fees, appraisal, and other charges.

Common refinancing fees

• Origination fee: Charged by the lender to process the new loan. Usually 0.5%–1% of the loan.
• Appraisal fee: Your home will need to be appraised. Expect $300–$600.
• Title search and insurance: Verifies ownership and protects against title disputes. Typically $700–$1,500.
• Credit check fee: Usually a minor fee, often $25–$75.
• Prepayment penalty: Some original mortgages include a penalty for paying off the loan early. Check your current loan terms.

How to decide if refinancing makes sense

The break-even analysis is the most useful tool: divide total closing costs by your monthly savings. If your closing costs are $8,000 and you save $200/month, your break-even is 40 months. If you plan to stay in the home longer than that, refinancing makes financial sense.

Use a mortgage calculator to estimate your new monthly payment and compare it to your current one.

How your credit score affects refinancing costs

Your credit score directly affects the interest rate you're offered when refinancing. A higher score means a lower rate, which means faster break-even and more savings over the life of the loan.

If your score has improved since you took out your original mortgage, that's a strong argument for refinancing. If it hasn't, it may be worth waiting and working on your credit first.

Other refinancing options to consider

Beyond rate-and-term refinancing, a cash-out refinance lets you borrow against your home equity. This can be useful for home improvements or consolidating high-interest debt, but it increases your loan balance and monthly payments.

Also consider your debt-to-income ratio — lenders use it to qualify you for a refinance just as they would for a new purchase.

Conclusion

Refinancing can save you significant money, but only if the costs are offset by the savings. Run the numbers, check your credit, and start strengthening your credit with Kikoff today if you need to improve your score before applying.