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Refinancing Cost

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Refinancing cost is the amount of money a borrower will have to pay upfront to refinance his mortgage. Refinancing cost is typically similar to the closing cost a borrower pays when financing his home for the first time. Refinancing cost is an important consideration for borrowers, as the refinancing cost can quickly erode gains generated by the more favorable terms of the refinanced loan. A borrower's overall refinancing cost might include a prepayment penalty, a type of refinancing cost that some states prohibit. Not all mortgages have a prepayment penalty, but if applied, it could significantly increase a borrower's total refinancing cost. The other components that are typically part of an overall refinancing cost include an application fee, appraisal fee, survey costs, homeowner's hazard insurance (unless the borrower can provide proof of current homeowner's insurance), and lender's attorney's fees. Other components of the refinancing cost include title search costs, title insurance costs (may be reduced to re-issue rate), home inspection fees, loan origination fees, private mortgage insurance (when loan-to-value ratio is greater than 80%), and discount points.



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