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How to Calculate Closing Costs on a Refinance

You may have heard that closing costs can destroy your mortgage refinance savings.  This is still true, even though the lowest mortgage rates available today seem to guarantee a significant reduction in your monthly payment.  Do the math before you apply.  The following items will incur costs during closing.

1.  Application Charge.

You will be charged a fee to apply for a refinance.  This can cost several hundred dollars.  Generally the charge is somewhere between $200 and $600.  This is a hefty fee.  Check with your lender to find out the exact cost of applying.

2.  Fee for Document Preparation.

Various legal forms will be drafted, which will cost money.  You'll pay for most of it.  Calculate at least $300 for this expense.

3.  Settlement Cost.

Another $300 for this expense, at least.  Sometimes as high as $400.

4.  Title Examination Fee.

This one might be as low as $100, depending on where you live and what title company you're working with.  But it can often cost as much as $500.  Check this out before you apply.

5.  Closing Costs.

This covers a variety of smaller expenses that are all involved with closing the actual loan package.  Expect to pay about $800, but again, this varies depending on where you live.

In a refinance, you'll typically end up paying up to 2% or 3% of the loan amount in closing costs.  This is significantly less than the costs associated with closing a home purchase loan, but this expense can eat into the money you'll save by refinancing.  Again, the most important thing you can do for yourself is think it through before you apply.

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