If you own a home, you might be considering refinancing your mortgage.
Doing so can lower your interest rate, allow you to pay off your mortgage sooner, or give you the ability to tap into equity to finance a purchase.
You could have many reasons to refinance your home, but it’s important for you to know what you’re getting into and what a refinance entails before you take the final steps.
As NerdWallet states, “A mortgage refinance replaces your current home loan with a new one.”
Your reasoning and wants are the important things. If you need to find areas to save money in and have good enough credit to do so, then a mortgage refinance might be a good option.
All in all, the choice comes down to you, but there’s still one question remaining: What is the average closing cost to refinance a mortgage?
The short answer: It depends.
The average can depend on the country you live in, as an example. Not only that, but the closing cost can be based on many factors, such as your credit score, your income, how much you borrow, the type of loan and fees, etc.
Not to mention, an internal refinance, which is refinancing with your current lender, as opposed to an external refinance (moving your loan to another financial lender), can save you money on fees. It’s likely cheaper to refinance with your current lender because of these fees, but it’s also based on a case-by-case scenario.
To give you a better example of what you might expect during this process, let’s see what The Lenders Network says:
“The average closing costs to refinance a mortgage loan in 2017 is 1.5%. This figure will vary based on different factors such as the loan type and your credit score. On a $200,000 mortgage the average closing costs will come out to 1.5%, or $3,000. If you are refinancing into a 30-year term, this means you will need to see a decrease by about $90 a month to break even.”
The answer for how much to refinance a home loan isn’t cut and dried because your information is necessary to figure out your closing costs. Luckily, some lenders will allow you to roll the closing costs into the loan so you won’t have to pay cash immediately.
No-closing-costs refinancing also exists, but a higher interest rate and paying more money over the course of the loan are also typically attached. So you might pay less now, but with a higher interest rate, you’ll pay more in the long term, and depending on how much higher, a lot more. That, of course, could defeat the purpose of refinancing because many Aussie homeowners seek refinancing to lower the interest rate and save money.
While The Lenders Network pointed out an average closing cost of 1.5% for 2017, the best way to find an accurate closing cost for your situation is by talking to your lender and seeing what that cost will actually be because everyone’s circumstances and loans are different and can vary.
You can also try using a refinance calculator to give you a better idea of what to expect.
No matter what your closing cost is, it’s important that you refinance your home only if it’s going to help you achieve your refinancing goals, such as saving money and/or paying off your loan sooner. The choice comes down to you, but to see exactly what your closing cost to refinance a mortgage is, we encourage you to contact your lender or the lender you plan on refinancing with.