If you plans to refinance their mortgage, look into doing it before December 1, 2020
As mortgage rate are in historic lows right now, many homeowner are considering refinance their mortgage. However, the cost of refinancing is poised to rise, depending on your lender and where you are in the application process. Starting on December 1, 2020, there is a 0.5% “adverse market refinance fee” will be charged to refinances sold to Fannie Mae or Freddie Mac.
What is “Adverse Market Refinance Fee”?
The Federal Housing Finance Agency (FHFA) will charge lenders the adverse market refinance fee on loans they sell to Fannie Mae and Freddie Mac starting on December 1, 2020. The reason for the fee is to recoup some of the expenses incurred by those government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, due to the economic downturn.
When “Adverse Market Refinance Fee” will start?
Starting on December 1, 2020, both standard refinances and cash-out refinances are subject to the new “Adverse Market Refinance Fee”. However, it won’t be applied new mortgages used for buying a home. You won’t have to pay the refinancing fee if you lock in your rate before December 1, 2020.
Who will be exempt from “Adverse Market Refinance Fee”?
If you are refinancing a mortgage that is under $125,000, you’ll be exempt from the fee. Government-backed mortgages, such as FHA, VA, and USDA loans, are also exempt from the fee. The fee will only apply to conventional loan.
Should you still refinance?
Everyone situation is unique and refinance might be not the best option for you. Experts recommend you’ll need to reduce your interest rate by at least one percentage for refinancing to make sense. You may also want to consider the closing cost. Most borrowers should expect to pay between 2% to 5% of the total loan amount in closing costs. On a $200,000 mortgage, for example, 3% closing costs will total $6,000. Adding in the new refinance fee, which is 0.5% of the total loan amount, closing costs jump up to $7,000.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ and surrounding area, we hope you will consider us. Contact us today for complimentary consultation.
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