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- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
The List of Cost to Refinance a Mortgage
When you are refinancing your mortgage there are different types of charges or fees that are incurred in the process.
Some fees are common and do not change no matter which lender you decide to refinance your mortgage with.
In this post, we will understand what is the cost to refinance a mortgage.
1) Application Fee
The first fee or cost to know about is the bank processing or the application fee. In the mortgage industry, this is typically known as a bank fee. The fee or cost for this varies from bank to bank.
This fee could be around a thousand dollars on average. This fee goes to the bank and covers the cost of processing your refinancing application.
2) Origination / Underwriting Fee
The second fee that you need to be aware of is the origination or underwriting fee. Once the lender takes in the refinance application and processes it, they then need to follow the guidelines in order to obtain approval for your new loan.
There are costs to the lender to assign an underwriter who will go through the guidelines and your documents to see if they match and if it is ok to approve your new refinance.
These fees could be anywhere between 0.5 to 1% of the loan amount. You can always negotiate these fees with the lender to optimize your cost to refinance your mortgage.
3) An Appraisal Fee
The third fee that we need to be aware of is the appraisal fee.
As you can imagine, anytime a bank lends on the property even if it is for refinancing an appraisal needs to be done so the bank will know that it is lending against a reasonable value or collateral.
The cost of an appraisal can range anywhere between $500 to $800 depending upon the area and type of house that you have. This is one of the few fees that are asked to be paid upfront.
We say this fee is typically paid upfront because all other costs and fees associated with refinancing can be added to the new mortgage balance if you have enough home equity.
So these is the fees that they will ask you to pay out of your pocket, usually after a couple of weeks after the application.
4) Bank’s Attorney Fee
The next cost that you need to know about is the bank’s attorney fee. This fee also ranges to around a thousand dollars.
In the past, pre-financial crisis, mortgage bankers would usually call up attorneys that they have good relationships with to ask for a discount perhaps as a favor for a client, and the attorneys were happy to accommodate.
However, post-financial crisis, the attorneys are auto-assigned for transactions. As a result, there is little to no negotiation and the fee is quite static and has crept up over the years.
5) Title Policy Re-issuance Fee
The next biggest fee to be aware of is the title policy re-issuance fee.
You will be surprised to hear that this fee can be quite or almost as much as the initial title insurance premium you might pay for a new purchase.
This business of re-issuing a title policy is very good for the title companies.
Well because the amount of work is relatively reduced if it is refinancing with a new lender, they simply change the name of the lender, they might do a new title search, but the fee is quite similar to a new purchase.
Of course, the actual cost is a very complicated formula that’s somewhat industry kept secret. This title policy re-issuance fee has a fixed and a floating component.
This means that as the loan size increases the fee necessary will also increase. From many studies done on the recent transactions, the average fee is anywhere between 0.3% to 0.5% of the loan amount.
Conclusion
So there you have it, Some of the most common costs to refinance a mortgage. These costs may vary from state to state and also to the type of your house.
We would suggest you get in touch with your trusted loan officer to know about these costs and make sure you have a better understanding to make an informed decision.
