Mortgage Rates Fall After Regulators Remove Refinancing Fee

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Mortgage Rates Fall After Regulators Remove Refinancing Fee

Mortgage Rates Fall After Regulators Remove Refinancing Fee

Falling mortgage rates have become even lower after news that the unpopular refinancing fees are coming to an end.

When the increase was first announced last summer, it sparked an outcry. This was to offset the pandemic-related losses of mortgage giants Fannie Mae and Freddie Mac, two government-sponsored businesses that buy most US home loans and take them out of lenders’ hands.

The commission increased the cost of refi by half 1 percent (0.5%), so a $ 300,000 loan would put you on the hook for an additional $ 1,500. Now that the markup is being lifted, the millions of homeowners who have yet to refinance their mortgages have another reason to do so – besides today’s low mortgage rates

Refund fees will officially be history next month

Woman Refinance Mortgage Online

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The Federal Housing Finance Agency – the regulator overseeing Fannie and Freddie – says the so-called “bad market fee” will be lifted from August 1 thanks to policies that have reduced the impact of the coronavirus crisis on both mortgages. firms.

“The COVID-19 pandemic has financially exacerbated America’s affordable housing crisis. Eliminating unfavorable market refinancing fees will help families reap the benefits of low rates to save money, ”says FHFA Acting Director Sandra L. Thompson. news release released on Friday.

Thompson’s agency expects lenders who have charged borrowers to pay back the savings to consumers. Basically, they paid the commission by raising mortgage rates.

Not all refinancing institutions will benefit from the removal of the surcharge because the commission has never been applied to:

  • Loans of USD 125,000 or less.

  • Possible low down payment Freddie Mac loans or similar HomeReady loans from Fannie Mae.

  • Government insurance FHA, USDA or VA credits

  • Loans that cannot be sold or guaranteed by Freddie or Fannie.

Most refinancing loans have triggered a commission since FHFA data shows that 72% of all refinancing loans were purchased by Fannie Mae and Freddie Mac during 2018, 2019 and the first half of 2020.

Mortgage rates drop as commission gets higher

Miniature wooden houses and a red down arrow.  The concept of lower interest rates on mortgages.

Andrey Yalansky / Shutterstock

In mid-August last year, Fannie and Freddie initially informed creditors of the commission and said it would take effect in just a couple of weeks, on September 1. The Mortgage Bankers’ Association – the industry’s leading home lending group – has reacted sharply.

“Requiring Fannie Mae and Freddie Mac to charge a 0.5% commission on their mortgages will raise interest rates for families trying to make ends meet during these difficult times,” said then MBA President Bob Braxmith. “The average consumer will pay $ 1,400 more than they otherwise would.”

Mortgage rates rose sharply following news of the commission. To contain the fallout, the FHFA announced in late August 2020 that the premium would be delayed until December 1, and rates fell quickly.

Mortgage rates fell again after lenders learned the commission was written off. According to Mortgage News Daily, the average rate on a 30-year fixed-rate mortgage fell from 3.04% on Thursday – the day before the FHFA announcement – to 2.89% on Monday.

For 15-year loans that popular refinancing option, the average declined over the same period from 2.50% to 2.35%.

“It is verifiable,” the rate cut was a result of the waiver of the commission, Matthew Graham, chief operating officer of Mortgage News Daily, told MoneyWise. On Friday Graham wrote in post that lenders have already charged any loans that have not yet been closed.

Bonus for homeowners

Man handing over money

Watchara Rityan / Shutterstock

With annoying refinancing fees ripe and mortgage rates plummeting again, homeowners who haven’t refinanced yet have largely run out of excuses.

And there are many such procrastinators: recent Zillow review found that 78% of eligible homeowners made not refinance their homes between April 2020 and April 2021, despite historically low mortgage rates.

Thanks to the recent cut in mortgage rates, 13.9 million American homeowners can save an average of $ 293 a month in refinancing, says mortgage technology and data provider Black Knight. The estimate is based on last week’s 30-year average mortgage rate of 2.88% in a long-term study by Freddie Mac.

But roughly 3 in 10 homeowners (29%) say they refer refs because they “don’t understand the process,” Zillow found.

Once you’ve gone through the home buying process, refinancing shouldn’t require you to do anything that you haven’t done before. When you begin the application process, you will need to provide most of the same income and other information that you requested when you applied for your original mortgage.

The process can get a little smoother and less costly if you follow these steps:

  • The best refinancing rates go to borrowers with the strongest credit history, therefore check your credit score for free and see if you need to improve it before applying for a new loan.

  • Once you’ve decided what you want out of your refinance — cash to play, a lower rate, or both — compare the rates offered by at least five lenders. This is a simple and important step towards optimization savings refinancing

  • If you think you can find the best rate or more convenient mortgage terms, do not be afraid to negotiate. If the lender you are working with is unwilling to budge, literally thousands of others will be more than happy to have your business.

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