The average cost to refinance a mortgage in California is going to vary from application to application but generally speaking, you should anticipate paying $2,800 to $3,500 depending on the size of the loan and the loan program. This amount does not include lender credits which would lower the amount and it also does not include discount points or origination fees (which would raise the amount).
With a little knowledge and preparation, you too can avoid paying thousands of dollars in junk fees with your next refinance transaction. And there is no secret insight about lowering the cost to refinance a mortgage; just an understanding of how the process works and being prepared is all you need.
Table of Contents
- How Much Does It Cost To Refinance a Mortgage In California?
- Steps To Lowering Your Costs
- How To Avoid The Mortgage Scams
- Recognize Junk Fees
- Focus On The Total Cost To Refinance A Mortgage
- Know The Difference Between Important Disclosures
- Never Just Call Your Current Lender
- Be Prepared Before You Obtain Quotes
How Much Does It Cost To Refinance a Mortgage In California?
As someone looks into refinancing their current mortgage they need to ask this important question; how much does it cost to refinance a house in California?
Not asking this question could cost you thousands of dollars on your next refinance transaction. The list below is just your basic cost and does not include discount points or origination fees.
An example of the cost to refinance a mortgage
- Lender Fees: $1100.00
- Tax Service: $100.00
- Flood report: $10.00
- Credit Report: $75.00
- Appraisal: $475.00
- Escrow: $550.00
- Notary $150.00
- Title Insurance: $500.00
- Recording Fees: $350.00
Total = $3,310.00
It is important to remember that this is just a generic break down and it does not include any lender credits, nor points, that might be issued. Also, some refinance transactions don’t need an appraisal, or sometimes the lender refunds the appraisal fee.
Steps To Lowering Your Costs
- Avoid the scams
- Recognize junk fees
- Focus on the total cost
- Know the difference between a Loan Estimate, Locked Loan Estimate and a Closing Disclosure
- Never just call your mortgage company
- Be prepared
Below we’ll cover each step so that you have a good understanding of how to lower your costs on your next refinance transaction.
This sounds like a no-brainer but it’s not as easy as you think. Scam artists are really good at not looking like scam artists and most people don’t know they’re being ripped off until it’s too late. So what should you look for?
Here are a few guidelines to follow:
- Avoid companies that don’t have a rating with the Better Business Bureau
- Avoid companies that have less than an “A” rating with the Better Business Bureau
- Be careful of Loan Officers with less than five years of experience and be extra careful with Loan Officers that have less than one year of experience.
- If a Loan Officer is short with you, unnecessarily rushes you, and avoids answering questions with a direct/specific answer that usually is a red flag.
- Never, ever give a credit card number when inquiring about a loan. Some companies say they are required to do this to “secure your rate” but thousands of other companies don’t do this. Work with the ones that don’t do this.
Working with an experienced Loan Officer that has a great reputation will help you avoid scams. He or she will also do a better job of helping you understand the cost to refinance a home.
Recognize Junk Fees
Another no-brainer but I think it’s important to specifically state what’s a mortgage junk fee and what’s NOT a junk fee. To lower the cost to refinance a home we need to clearly explain the difference between junk fees and legitimate fees.
- Lender Application fees
- Lender Funding fees
- Lender Rush fees
- *Lender generic Processing fees – there is an asterisk because some lenders charge a legitimate processing fee rather than an underwriting fee (see below).
Not Junk Fees
- Underwriting (or Administration) fee that’s less than $1,100
- Tax Service and Flood Certificate
- Credit Report fee (ask to see the invoice)
- Appraisal fee (if one is needed)
- Title, Escrow, and Recording fees
- FHA Funding fee (if you are doing an FHA loan)
Understanding the difference between Junk fees and legitimate fees associated with doing a mortgage is important to the overall loan process.
Focus On The Total Cost To Refinance A Mortgage
This is so important and an inside tip on what to ask the Loan Officer.
Far too often people focus on the label and the individual amount rather than the total cost to refinance. For example; I constantly hear from potential clients that say they were quoted a “no-point” loan and a super low rate and I ask them the following question:
What is the total cost of the loan and are they charging any origination fees?
99% of the time the answer is I don’t know because many people believe a no-point loan is a no-cost loan and Loan Officers know this.
Second, many “no-point” loans have origination fees which are basically points however they are not “discount points” which is different.
I could go on and on about how Loan Officers try to hide the true cost of a loan however the way they do it is not the most important thing. And there is a very simple way to get to the bottom of what fees you are paying. Just ask this one simple question:
What is the total cost of the loan; for everything?
Don’t get hung up on lender fees, points, origination fees, or third-party fees because this is exactly what the Loan Officer wants you to do – focus on something so they charge more in other areas.
By asking “What is the total cost of the loan; for everything?” you have a specific number so when you receive your Loan Estimate or Closing Disclosure you can add up all these to see if they match. Remember you want to know the total cost to refinance a mortgage so make sure you ask that specific question.
Know The Difference Between Important Disclosures
Three of the most important disclosures you’ll see during the refinance process are:
- Loan Estimate
- Locked Loan Estimate
- Closing Disclosure
Now for those that lock upfront, you’ll only receive a Locked Loan Estimate and a Closing Disclosure. A Locked Loan Estimate specifically says that in the top right corner and if you think your rate is locked make sure you see the proper lockbox checked.
Now if you followed my rule on asking what are the total costs for everything you can now go through the loan estimate and add up all the fees. And it only takes 2-3 minutes. This step alone could save you hundreds if not thousands of dollars and it only takes a few minutes.
Are Their Examples Of Legitimate Differences?
Title, escrow, and recording fees might be listed a bit higher on the Loan Estimate than your initial quote as they are usually listed as a worst-case scenario. And the difference is more like $100 – $500 (depending on the loan amount) not thousands of dollars.
For example; some title and escrow companies quote $375 – $450 (for most loans) for government recording fees however they usually come in below $200 when the loan actually closes and that is reflected on the final Settlement Statement. Another example is the lender may require a specific endorsement issued from the title company which may increase your costs by $50 – $200.
HOA Certification Fee:
And there is the HOA Certification Fee which is listed in the Loan Estimate but it’s not charged by the lender. What is the “HOA Certification Fee”? If you live in a Condo or Townhome your Loan Officer will have to complete an HOA Certification. It’s a form and it’s completed by your HOA or property management company.
Usually, the HOA or property management company charges a fee (not the lender). This is why it’s not included in the quote but is listed on the Loan Estimate.
So it’s important to keep in mind that the document you are reading is an “estimate” however if there are differences from the quote be sure to ask your Loan Officer to explain the difference. And if you are working with a top-rated company and a top-rated loan officer who has years of experience you can probably trust what they are saying.
The Closing Disclosure is a very important document. Once this document is issued the fees being charged can not go up and no new fees can be added to closing documentation. The Closing Disclosure is issued at least three days before you actually sign your loan documents so you’ll have plenty of time to review them.
And what are the two most important things to review?
Your interest rate (make sure it’s accurate) and the total amount of fees being charged.
Never Just Call Your Current Lender
I know it sounds easy but never just call the mortgage company that currently handles your mortgage. You’ll almost always pay more than you need to. Sometimes it could end up costing you tens of thousands of dollars in extra fees and interest.
And take it with a grain of salt if the Loan Officer claims it’s a much easier process since they already have your mortgage because it’s not. Call 2-3 mortgage companies that have at least an “A” rating with the Better Business Bureau and talk with a Loan Officer with at least five years of experience. Ten years or more is even better.
This is the best way to lower your cost to refinance.
Be Prepared Before You Obtain Quotes
Being prepared before you obtain your California refinance rate quotes will lower your cost to refinance and save you lots of time. The first step to getting prepared is to gather your income documentation, any mortgage statement from your current lender, and your homeowner’s insurance declaration page (or at a minimum the contact information for your Insurance Agent.
Having your documentation ready to go means you’ll be better prepared to answer the Loan Officer’s questions.
It also means you can send in your documentation faster which helps speed along the process. And don’t forget that Loan Officers are people too and when a Loan Officer sees someone is prepared they are more likely to go that extra step in making sure you obtain the lowest rate possible at the best possible terms.
The goal is to lower the cost to refinance a home and this is a great step to take.
If you go into the process unprepared and take a long time putting together your documentation then the Loan Officer is more likely to focus on clients who make his/her job easier.
Chasing down clients for their income documents is time-consuming so the more you can help your Loan Officer with the process the better off you’ll be.