Q: Considering refinancing. Currently paying 4% on $160,000; A lender is advertising a 30 yr FRM at 2.85%/3.191% APR, or a 15 year FRM at 2.75%/3.276%. How can I tell what the actual closing costs will be?
A: There are a couple of ways to figure out what the closing costs for either loan will be. First, ask the lender; while they are under no obligation to provide you a Loan Estimate (formerly Good Faith Estimate) of loan costs before you actually apply, many will at least give you a working idea of those that were used to create the APR they are quoting to you.
Another means is to "reverse engineer" the loan quote using HSH's APR calculator. Since you know the interest rate and the APR, use the calculator to help solve for the cash amount of fees (or combination of points and fees) that go into the APR. For example, for the 2.75% 15-year FRM to have an APR of 3.276%, it would need to have a 1 point fee ($1,600) plus about $2,750 in other closing costs -- a total of about $4,350 to give you an APR of 3.28%. There are any number of possible rate and point combinations that can bring this -- such as zero points and $3,750 in closing costs, so you'll have to iterate a number of times to closely approximate the actual costs for the loan.
To get perhaps the best estimate of what it will cost for your refinance, you need to look no further than your own records. When you closed your existing loan, your lender gave to you a Closing Disclosure statement (post-2015) or a HUD-1 Settlement Statement (pre-2015). On it will be a full list of the fees you paid to get the loan; some may be a little different, depending on your choices (such as whether you paid points then or will be paying them now) and depending on how long you've had your existing mortgage, you may need to adjust costs a little for inflation, if nothing else. However, these are costs for an actual loan made against your actual home to an actual borrower (you) and so will be pretty accurate for your refinance situation.
Of course, when considering loan offers, always keep in mind that advertised rates are usually quoted for truly optimal borrowers with the strongest credit and other credentials, and your situation is likely to be different, so your APR will be different, too.
