How much does it cost to refinance a mortgage?

Refinancing a mortgage typically costs 2%–5% of the loan balance in closing costs — the same categories as a purchase mortgage. On a $350,000 balance, expect $7,000–$17,500 in costs. Whether it's worth it depends on your break-even timeline: divide total closing costs by your monthly savings to see how many months it takes to recoup.

A mortgage refinance replaces your existing loan with a new one — which means going through essentially the same closing process, with similar fees. The CFPB's refinancing guide identifies closing costs of 2%–5% of the loan balance as typical, covering lender fees, third-party services (appraisal, title), and prepaid items.

Common refinance costs

Origination / lender fee: 0.5%–1% of loan amount — covers underwriting and processing.
Appraisal: $400–$700+ — required to confirm current property value (sometimes waived with automated valuation).
Title search and insurance: $500–$1,500+ — confirms the lien position of the new loan.
Recording fees: $50–$200+ — varies by county, charged to record the new mortgage.
Prepaid interest: From closing date to end of the month.
Escrow setup: If escrowing taxes and insurance, 2–3 months of tax and insurance deposited upfront.

The break-even calculation

The core question for any refinance is: how long will you stay in the home? Divide total closing costs by your monthly payment reduction to get the break-even point in months. If you save $200/month and pay $6,000 in costs, break-even is 30 months (2.5 years). If you plan to sell or move before then, refinancing likely doesn't pay. The CFPB refinance worksheet walks through this calculation.

Break-even example

Loan balance: $350,000. Current rate: 7.5%. New rate: 6.5%. Monthly payment drops ~$220. Closing costs: $8,000. Break-even: $8,000 ÷ $220 = 36 months. If you plan to stay 5+ years, the refi likely makes sense. If you're moving in 2 years, the upfront cost outweighs the savings.

No-closing-cost refinances

A 'no-closing-cost refi' doesn't eliminate costs — it rolls them into a higher interest rate or adds them to the loan balance. This can make sense if you plan to sell or refinance again soon (before break-even on a conventional refi), but you'll pay more over the life of the loan. Ask the lender to show you the comparison between paying costs upfront versus rolling them in.

Watch for prepayment penalties on your current loan

Some older mortgages include prepayment penalties that trigger when you refinance within a certain window (often 2–5 years). Check your existing loan documents before calculating the cost of a refinance — a prepayment penalty can negate the savings entirely.

CFPB guidance

The CFPB estimates mortgage refinancing costs typically total 2%–5% of the outstanding loan balance, similar to the closing costs on a purchase mortgage. — CFPB — Refinancing Your Mortgage
Under TRID rules, lenders must provide a Loan Estimate within 3 business days of a refinance application, with a final Closing Disclosure at least 3 days before closing. — CFPB — TRID

Key takeaways

Refinancing costs 2%–5% of the loan balance — budget this before deciding whether to proceed.
Break-even = closing costs ÷ monthly savings. If your timeline is shorter, refinancing may not pay.
No-closing-cost refis embed costs in the rate or balance — they're not free.
Check your current loan for prepayment penalties before calculating refinance savings.

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