If you're just looking to lower your interest rate, do the math on how much money you will save each month and see where you break even on your closing costs. For example, if my closing costs were $1000, and my new loan was going to save me $100 / month, then it would just be a short 10 months before I broke even on that investment of $1000.

To reiterate, talk to an experienced mortgage broker about all your options. Weigh those against your motivations for the refinance, and proceed accordingly.

The closing fees are only high depending on what your motivation is for refinancing and whether or not you are getting ethical quotes.

For instance, some people want to refinance to get equity out of their homes. That equity has a price if you want to access it. Either you are going to have to pay standard fees, or have a higher interest rate. Whether you pay for it now or later, there is a cost that must be paid when you want to get equity out of your home.

Others want to refinance to lower their monthly payment or lock in a 30 year fixed rate. In this instance, closing costs are relative to how much money you will be saving each month after the refinance.


You can lessen the perceived cost in several ways.

First of all, ask a mortgage broker about a no closing cost line of credit. This assumes you just need to tap some equity.

If, on the other hand, you are trying to lower your interest rate or lock in a payment, etc..., you may want to ask your mortgage broker about doing the loan at a higher interest rate, but with less closing costs. This is possible because the higher the interest rate is, the mortgage broker actually gets a rebate from the bank. If the interest rate is high enough, the broker will have enough to pay themselves as well as some of your closing costs.

Another way to lower costs is to consider waiving your impound/escrow account. Your rate may go up by about .125%, but it can drastically reduce your closing costs. Keep in mind, that's not free money and you will have to be responsible to pay your own taxes and insurance when they are due.

Finally, you need to assess your reasons for wanting to refinance and do the math. If you need cash out for something extremely important, closing costs wouldn't matter much.