When banks drop mortgage interest rates, there is often a significant increase in refinancing activity that takes place as home owners aim to lower their monthly payments and gain the overall benefit of a lower interest rate.

The concept makes complete sense – after all, who would not want to pay less when the opportunity arises? On the other hand, there are some fees and closing costs that might be overlooked in the decision-making process.

While there are closing costs to consider, there are also other factors to be aware of when starting down this path.

For example, your credit scores, loan type and amount of equity in your home are all a part of the final fee calculations. In addition, common costs that occur during a mortgage refinance closing include:

  • Application or origination fees
  • Underwriting fees
  • Home appraisal fees
  • Title insurance fees
  • Credit report fees
  • Discount points (which may be applied to secure a lower interest rate)

These fees are announced ahead of time, offering you the opportunity to negotiate, or ask for waivers under certain conditions. As the home owner, you have the ability to take your time, investigate offers from other lenders, and make thoughtful, educated decisions. 

Just beware when you are told “no closing costs” that this is probably a misleading statement at best!