The large mortgage refinancing fees have simply disappeared, which could save borrowers $ 1,500 or more. Is it time to refinance?

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Mortgage giants Fannie Mae and Freddie Mac “will abolish unfavorable market refinancing fees for their loans from August 1, 2021,” notes the Federal Housing Finance Agency. This means that if you refinance your mortgage now, you won’t be paying that commission, which will likely save you money, experts say. Here’s what you need to know if you want to refinance now, and You can compare the best refinancing rates to date here

What was the refinancing fee in an unfavorable market?

The unfavorable market refinancing fee was a 50 basis point fee that Fannie Mae and Freddie Mac charged lenders when they transferred refinanced mortgages to two mortgage companies; the royalties were often passed on to the borrowers. The fee was introduced because: “When the pandemic led to high unemployment, regulators feared that a foreclosure crisis would follow. FHFA added a refinancing fee to boost Fannie Mae and Freddie Mac funds so they can afford to increase foreclosures, explains Holden Lewis, NerdWallet’s home and mortgage expert at NerdWallet.

But the foreclosure crisis did not happen: “Only 2% of Fannie Mae and Freddie Mac loans are tolerated, and that number is steadily declining,” explains Greg McBride, chief financial analyst at Bankrate. And now Frannie and Freddie have canceled fees that the FHFA says will “help families reduce their housing costs.” Find the best mortgage refinancing rates in your area here

How much can you save on refinancing now that refinancing fees disappear in an unfavorable market?

“The removal of the commission lowers the cost of refinancing for homeowners with Fannie or Freddie loans in excess of $ 125,000,” McBride says. He estimates that a borrower refinancing a $ 300,000 loan will see this either through a lower interest rate per percentage point, which is about $ 20 a month, or by cutting closing costs by $ 1,500. (Some lenders included a 0.5% commission in closing costs – for example, for a $ 300,000 loan, that would mean closing costs of $ 1,500 – or added it to the total loan amount, others raised rates on mortgages to recoup the commission). “The removal of the commission will benefit people who refinance mortgages guaranteed by Fannie Mae and Freddie Mac,” Lewis said. Find the best mortgage refinancing rates in your area here

Should you refinance now?

McBride suggests this is a great opportunity for meaningful refinancing and reducing monthly payments, especially given the rising cost of many other things: “The removal of the FHFA commission makes the refinancing math even more compelling,” McBride says. And not only can cut commissions save you money, but the ultra-low rates now being offered for refinancing. (here you can compare the best refinancing rates to date).

Lewis says other reasons for the refi are “to cut the loan term from, say, 30 to 15 years, so that less interest will be paid over time” and “to get rid of the FHA mortgage insurance, which in most cases cannot be canceled.” The general rule of thumb is that refinancing is worth it if you can lower your interest rate by three-quarters of a percentage point and plan to stay home for at least a few years to recoup the cost, Lewis said. expenses related to ref. All of these groups could benefit from the elimination of refinancing fees, especially since interest rates are at their lowest level since February. Compare today’s best refinancing rates here

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