Q: How Will the Upcoming Refinance Fee Affect You?

By Jorge Gonzalez

Jorge has been selling, managing and investing in both residential and commercial real estate since 1986 and has worked with Buyers and Sellers to navigate them through hundreds of transactions.

So many of my clients, family, and friends are asking me what’s going on with real estate, and one topic that keeps popping up is the fact that interest rates are at an all-time low. Due to this, many people are thinking of buying a new home or refinancing the mortgage on their current one. Refinancing, in particular, is a smart move if you’re in the right position to do so. If you have the right credit profile, you can secure a rate of under 3%. 

All this activity caused by interest rates is negatively affecting banks, though. Since we’re in an adverse market, lenders are hurting and trying to recoup some of their funds. That’s why, on December 1, 2020, the Federal Housing Finance Agency (FHFA) will implement the adverse market refinance fee. This fee amounts to 0.5% of the value of the mortgage you’re refinancing. Basically, it’s equivalent to a new closing cost you’ll have to pay when you close on your refinanced mortgage. 

The FHFA regulates mortgages sold to Fannie Mae and Freddie Mac, and most of the money that goes into regular mortgage lending comes from these companies. All the loan originator at your bank or brokerage does is originate the mortgage; after that, they sell on the secondary market. The two biggest buyers in this market are Fannie Mae and Freddie Mac. 

As of December 1, for every $100,000 you borrow for your refinance, you’ll have to pay $500 as an upfront closing fee. Since this obviously increases the cost of your refinance, you’ll want to do this sooner rather than later to avoid this fee. 

If you have more questions about this topic or want to get started with your refinance, give me a call today. I’d be happy to advise you and put you in touch with one of the many quality local lenders I know. I look forward to hearing from you.