Closing costs
What is closing costs?
Closing costs are the fees required to originate a mortgage — origination, appraisal, title, recording, and prepaid items. On a refinance they commonly run about 2% to 5% of the loan amount.
What it means in practice
You can pay closing costs in cash at closing or roll them into the loan balance. Rolling them in preserves cash but means paying interest on those fees for the life of the loan.
A so-called no-closing-cost refinance does not eliminate the costs. The lender either adds them to the balance or charges a higher interest rate to cover them.
Closing costs are the numerator of every break-even calculation, which is why an accurate figure matters more than an accurate rate quote when you are deciding whether to refinance at all.