Cash-Out Refinance Closing Costs: Borrower’s Checklist and Guidelines
Published May 28, 2022
Borrowers seeking a cash-out refinance should determine potential cash-out refinance closing costs. This type of loan replaces your existing loan with a bigger mortgage. You can utilize the equity that you’ve built up in your home and get cash from the difference between your current mortgage and new one.
In this situation you’re taking on a more substantial mortgage, whether you remodel your home or consolidate your high-interest debts. It’s important that you understand your payment expectations early in the process. You may otherwise foreclose on your home if you default on the loan.
The right lender will not only help you save money when you close on a new loan. When you search for a lender, ask about making sure you don’t overpay on the typical cash-out refinance closing costs. Some of the common costs when you do a refinance can be:
Home appraisal: A mortgage lender uses a home appraisal to understand your property’s value. You may need to spruce up your home before refinancing so a reassessment goes well. You will usually pay between $250-$700 for an appraisal.
Credit checks: Lenders seek borrower credit reports to review your overall credit score. You’ll likely pay credit reporting agencies around $25-$50.
Attorney fees: You’ll deal with attorneys or title companies that close your refinance loan. Either one can charge you anywhere from $500-$1,000.
Flood certification: You may pay $15-$25 for these cash-out refinance closing costs. You’ll also learn if you will need to pay for ongoing flood insurance if you’re located in a flood zone.
You may not feel too concerned if you have the financial stability to pay these fees. However, you should still speak with a mortgage consultant. Our experts will work with you so that you can save money during the full closing process. Whether you want to wrap closing costs into the loan or pay them up front, we can help you make a sound decision.
Which refinancing fees can you negotiate?
Homeowners can negotiate certain refinancing closing fees. The trick is knowing which fees are negotiable versus which ones are non-negotiable. A thorough lender will assist you in identifying which cash-out refinance closing costs are flexible. The negotiable fees include:
Loan application: Lenders charge a variety of in-house fees when borrowers apply for a loan. You can negotiate many of them to help reduce your closing expenses. Talk early to your potential lender about which loan application fees are flexible. It is also important to ask which ones the specific lender can waive.
Loan origination: Look into waiving origination fees when you refinance. This fee is negotiable because it’s an in-house charge. You may be able to request a rebate or discount from a prospective lender. Actively pursuing the cost-saving option may help you save thousands of dollars when you close on a loan.
Underwriting: Underwriting fees are among the most common in-house, cash-out refinance closing costs. Lenders sometimes charge this fee instead of charging an origination fee. Other lenders may charge the fee in addition to the origination fee. Check with your lender about whether they will reconsider the charge.
Homeowners’ insurance premiums: Lenders require that all borrowers obtain homeowners’ insurance. However, you should still strive to get a low price on an insurance policy. You can achieve that by being realistic and discussing your current financial situation with a qualified consultant.
Title insurance: Your title insurance policy will protect you from liens or title defects. The policy works as a supplement for what you don’t learn during the preliminary title search. Title insurance as a whole is one of the non-negotiable cash-out refinance closing costs. You can still speak with a title company and ask if they’ll waive additional copy fees, or even waive mail or courier expenses.
How much does a cash-out refinance cost?
Borrowers must maintain at least 20% equity in a home after obtaining a cash-out refinance. But that percentage can occasionally differ based on your credit score and the mortgage that you try to obtain.
For instance, let’s say that your home is currently valued at $400,000 and your current mortgage is $100,000. That means your home equity amounts to $300,000. To maintain at least 20% of the equity, you will need to have at least $80,000 in home equity. In other words, you’ll need to prove that you can borrow up to $220,000, possibly including cash-out refinance closing costs.
The numbers may seem overwhelming written on paper, but American Financing can streamline the process for you. You can input your original mortgage, new mortgage, and additional details like terms and interest rates when you use our Mortgage Refinance Calculator. A calculator can help determine how much a refinance will save you per month. It will also calculate if you’ll be spending more or less over the loan’s life and how much.
How American Financing saves you money on closing
It’s important not to overpay on your closing even if you cannot avoid certain costs. Your lender must show transparency, in compliance with the law, for any cash-out refinance closing costs. They will outline these costs in a loan estimate form. You should expect the form with all figures within three days of submitting your home loan application. Reviewing these fees at the start of the process lets you adjust your budget as needed and circumvent undisclosed fees.
American Financing assists homeowners in a few ways when you’re ready to refinance your home. Our mortgage consultants will let you know if you’re overpaying for any required or negotiable service. We also offer clients the opportunity to wrap their closing costs into the mortgage principal.
If you’re interested in starting the refinancing process, get in touch. We’ll gladly sit down for an hour and help you complete a mortgage application. You can also schedule a 10-minute phone appointment with us. We will answer any of your questions regarding cash-out refinance closing costs or address any of your additional concerns.