The Costs to Refinance

• You can expect to pay 3 percent to 6 percent of your loan amount in fees and closing costs when you refinance. That comes out to thousands of dollars. That's why it's so important to make sure your monthly savings will be significant enough to allow you to recoup these fees quickly.
  
  

Work With Your Existing Lender

• You might be able to cut down on these costs by working with your existing mortgage lender to refinance your loan. Many lenders offer fee reductions to existing clients that remain with them when they refinance their mortgage loans. Others will eliminate some of the steps, and the fees associated with them, when they work with existing customers. For instance, your lender may skip the credit check that it will run on new customers because you already have a habit of paying your home loan bills on time with them. This can save you money. Other lenders won't require that you submit as much paperwork to them verifying your employment status and gross monthly income if you're already a customer. This, too, can save you money; your lender won't have to charge you the fees associated with verifying this information.
  
  

Shopping Around

• You can also make your refinance more affordable by shopping around with other lenders, especially if your existing lender isn't offering any generous discounts. You do not have to refinance with the lender to which you are currently sending your mortgage payments each month. You can work with any bank or lender that is licensed to do business in your state. This means that you can shop around for those lenders willing to refinance your loan for the lowest closing costs. Because lender fees vary across the country, you can shave a significant amount of dollars off your refinancing costs if you're patient enough to shop around for the least expensive lender.
  
  

FHA Streamline

• If you already are paying down a mortgage loan that is insured by the Federal Housing Administration, you could save on refinancing costs by applying for an FHA streamline refinance. Under this program, lenders are not required to order appraisals of your home. These appraisals, which determine the current market value of your residence, usually run $450 to $600. Other lenders offering FHA streamline refinances lower the out-of-pocket costs that borrowers have to pay.