How Much Does It Cost to Refinance a Mortgage in California?

Refinancing your mortgage can be a smart financial move—whether you’re looking to lower your interest rate, shorten your loan term, or cash out some of your home equity. But how much does it actually cost to refinance a mortgage in California? Understanding the fees involved and how to minimize them can help you determine if refinancing is the right decision for you.

What Is the Average Cost of Refinancing a Mortgage?

The total cost of refinancing a mortgage varies based on factors like loan size, lender fees, and third-party costs. In California, the average cost to refinance typically ranges between 2% to 5% of the loan amount. For a $500,000 loan, that means refinancing could cost between $10,000 and $25,000.

Typical Refinance Costs Include:

• Loan Origination Fees: 0.5%–1% of the loan amount
• Appraisal Fees: $500–$800
• Title Insurance and Settlement Fees: $1,000–$2,000
• Credit Report Fees: $30–$50
• Escrow Fees: $500–$1,500
• Recording Fees: $100–$250
• Prepaid Interest: Varies based on loan amount and closing date
• Private Mortgage Insurance (PMI) Removal Fee (if applicable): Varies

How to Lower the Cost to Refinance a Mortgage

Refinancing fees can add up quickly, but there are ways to reduce these costs:

‍1. Shop Around for Lenders

Not all lenders charge the same fees, so comparing multiple loan offers can help you find the best deal.

2. Negotiate Fees

Some lenders may be willing to waive or reduce certain fees, especially origination or underwriting fees.

3. Consider a No-Closing-Cost Refinance

Some lenders offer no-closing-cost refinancing, where fees are rolled into the loan amount or covered through a slightly higher interest rate.

4. Use Lender Credits

Lenders may offer credits in exchange for accepting a higher interest rate, reducing upfront out-of-pocket costs.

Recognizing Closing Cost Junk Fees

Some fees are legitimate, while others—often called junk fees—are unnecessary or inflated. Understanding the difference can help you avoid paying more than you need to.

Junk Fees

• Excessive Application Fees
• Unnecessary Administrative or Processing Fees
• Duplicate Fees (e.g., charging for both underwriting and document preparation)

Legitimate Fees

• Title Insurance
• Appraisal Fee
• Credit Report Fee

Focus on the Total Cost

Always ask for a Loan Estimate to compare costs and determine if the lender is charging excessive fees. Look at the total loan cost rather than just individual fees.

Understanding Loan Disclosures

When refinancing, you’ll receive multiple disclosure documents. Two key ones to review are:

HOA Certification Fee

If you live in a homeowners association (HOA), you may need to pay a certification fee, typically $200–$500.

Closing Disclosure

This document outlines all final loan terms and costs—review it carefully before signing.

Never Just Call Your Lender for a Quote

Getting an accurate refinance quote requires more than a quick phone call. Instead:

• Ask for a written Loan Estimate
• Compare rates and fees from multiple lenders
• Consider all costs, including closing fees and long-term interest savings

The Bottom Line on the Cost to Refinance a Mortgage

Refinancing can be a great financial move if the savings outweigh the costs. Before making a decision, calculate your break-even point—the time it takes for refinance savings to cover closing costs. If you plan to stay in your home long enough, refinancing could be well worth it.

FAQs

How much are closing costs on a $500,000 house in California?

Closing costs typically range from 2% to 5% of the loan amount, so for a $500,000 mortgage, expect to pay between $10,000 and $25,000.

Will my monthly payments decrease when I refinance?

If you refinance to a lower interest rate or extend your loan term, your monthly payments may decrease. However, rolling closing costs into the loan or shortening your term could increase payments.

Does refinancing a house make it cheaper?

Refinancing can save you money on interest over time, but closing costs must be factored in. Calculate your break-even point to determine if refinancing is a cost-effective choice.

Will a mortgage refinance get rid of my PMI?

If your home’s equity reaches 20% or more, refinancing to a conventional loan can eliminate private mortgage insurance (PMI).

Can you refinance without paying closing costs?

Yes, some lenders offer no-closing-cost refinancing, where fees are added to the loan balance or offset by a higher interest rate.

What is a no-closing-cost refinance, and is it a good option?

A no-closing-cost refinance eliminates upfront fees by slightly increasing your interest rate. It’s a good option if you don’t want to pay fees out of pocket but may cost more in the long run due to the higher rate.

Refinancing in California comes with costs, but with smart planning and lender comparison, you can minimize expenses and maximize savings. If you’re ready to explore refinancing options, reach out to a trusted lender to get personalized quotes and advice!