With the Federal Agency for Housing Financing mortgage refinancing costs The lenders, which will take effect on Dec. 1, have already started pricing their mortgages to account for the additional costs.
While December may seem a little far away, it usually takes at least 30 days to take out mortgages. Demand for refinancing is high due to historically low levels interest ratesThis means that some companies may take up to 60 days to complete loans. As a result, they must now start booking the new fee.
If you’re considering refinancing, here’s what you need to know – and how you can potentially avoid paying the fee if you act quickly.
What is the refinancing fee?
The FHFA announced earlier this summer that it would start levying a 0.5 percent fee on all mortgage refinances starting in September. After some outrage was the implementation date delayed until December 1, and loans for less than $ 125,000 were exempt.
Which loans does this fee apply to?
The fee is aimed at mortgage refinances with principal of $ 125,000 or more. Technically, the fee only needs to be charged for mortgages that will eventually be sold to Fannie Mae and Freddie Mac, but that accounts for two-thirds of all mortgages in the US, so many lenders will likely put the fee on most loans anyway charge. No fee is charged for refinancing through the VA and FHA.
How are the refinancing costs charged?
The lenders have to pay it when they sell their loans to the agencies. The two most common ways the fee is passed on to the borrower are higher closing costs or slightly higher mortgage interest.
With a $ 300,000 mortgage, the fee represents an additional $ 1,500 for the loan.
Greg McBride, Bankrate’s chief financial analyst, said it’s best to prepay those fees up front if you can.
‘If you can afford it cash at closing, see if your lender offers that option at a lower rate, ”he said. “Over time, the additional interest will add up to more than just paying the fee.”
Can I avoid having to pay the fee?
Yes. That’s the good news: there is still time. While most retail mortgage lenders and some wholesalers have already started charging the new mortgage tax, not all lenders have.
“We’re not implementing it at all this month,” said Mat Ishbia, president and CEO of United Wholesale Mortgage, which provides loans through mortgage brokers“If it takes you 45 or 60 days to take out a loan, add it right now,” he added. “We’re closing in 15-17 days, so it won’t really affect us.”
Ishbia said the best way to avoid paying the fee is to work with one mortgage broker who can help you find lenders who aren’t charging it yet.
McBride also said that acting quickly is the best move if you want to avoid the fee.
Your best way to avoid the fee is to trade now and then shop for the most competitive conditions. Pinning down your refinance application and your interest rate sooner rather than later can get you under the hook. “
What if I miss the window?
Refinancing a mortgage can be a time consuming process, and it’s not something most people should rush.
Ishbia said that even if you can’t close before the fee takes effect, you will still benefit from low interest rates. Bank interest mortgage refinance calculator can help you decide.
“It’s not that big of a deal in this market,” he said. “People like to talk about compensation, but the reality is that the rates are extremely low. There was no fee back in January and the rates were three and three eighths and people were excited to refinance at three and three eighths, and now they’re in two. “
Now that interest rates are even lower, he advises refinancing applicants not to focus so much on the fee anyway. Even once implemented, 30-year fixed mortgage rates should remain below 3 percent – a great deal in all respects, Ishbia said.
The FHFA mortgage refinancing fee is coming. If you really want to avoid it, you need to act quickly to get your refinancing application in. One way is to partner with a mortgage broker who can put you in touch with a lender who has not yet started charging the fee.
If you miss the deadline or can’t find the right lender, you will still benefit from low interest rates. If you have to pay the fee, you should talk to your mortgage lender about prepaying as part of your closing costs. If you can afford it, you can save money on interest in the long run.
You can also avoid the reimbursement through your mortgage through a direct lenderThe additional cost is only added to mortgages intended to be resold to Fannie Mae or Freddie Mac, but direct lenders keep their mortgages on their own books for the life of the loan. However, keep an eye on closing costs and look at your total savings.
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