Bring a check to closing (just like you probably did when you purchased your home)

Roll your closing costs into the principal balance of your loan

Cover lender and third-party closing costs through a slightly higher rate

Which option is best for you? That depends on your goals for refinancing and the amount of cash you have available for closing costs. At the very least, all 3 options usually require you to pay at closing for pre-paid interest on your new loan and the costs, if any, of setting up an escrow account for taxes and insurance.

Bringing a check to closing
Is a good strategy if you're refinancing to lower your rate and plan to keep the home for a long time (4 years or more). In this situation, you may want to pay points to get as low a rate as possible — a rate you'll be happy with for years.

Rolling your closing costs into the loan
Works well in situations where you are planning to keep your home for a long time (4 years or more), but don't want to commit cash to closing costs. Amortized over the term of your loan, the closing costs increase your new loan's monthly payment only a small amount.

Covering lender and third-party closing costs through a higher interest rate
Is often called a "no out-of-pocket costs" loan. (Don't forget you may still have to make roughly the equal to your first month's payment at closing for pre-paid interest and escrow account setup). This is a good option for reducing your payment in a market where rates are declining. In fact, since there are no lender or third-party fees to pay "out of pocket," you can do it more than once if rates continue to decline. You do pay a slightly higher rate than you would for a loan that doesn't pay your closing costs. That typically makes this option best suited for situations where you don't plan to be in your home more than 4 years and are looking to cut payments in the short term.

What's the best way to handle closing costs for you? Ask Countrywide. We can recommend the best option or combination of options for your situation. Or try our Refinance Calculator

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Anticipating total costs for standard refinancing
Decided a "no out-of-pocket costs" loan isn't the right option for you? Then let's look at the various fees and charges you'll most likely need to pay before or at closing. (See our Closing Cost Estimator for a quote on your loan's approximate costs.)

Lender-related costs
Third-party fees
Pre-paid costs

Lender-related costs
The cost of a loan is more than rates and points. Prior to selecting a lender for a specific loan, you should ask what other fees there will be in addition to the points. Within 3 days of application, you'll be mailed what's called a Good Faith Estimate of what the loan will cost. And this is just what the name says. It's an estimate. And, in "good faith," it's as accurate as possible given the information available at the start of the loan process.

You'll also be mailed an initial Truth-in-Lending disclosure which includes the APR and other financial terms within 3 days of application. A HUD-1 Settlement Statement will be issued to you shortly prior to closing that provides you with the full disclosure of closing costs. It establishes the total funds you must bring to the closing meeting and itemizes how and to whom the funds are to be disbursed.

Third Party Fees
Third-party fees are collected by your lender for services provided by outside parties, such as an appraiser. All lenders typically require some of these fees. Many of the services are regulated by various governmental organizations.

Pre-paid costs
When you refinance a home, there will be some necessary charges to cover things like the interest on your loan until your first payment is due. These are called "pre-paids" and include the following items.