Refinance Fees Have Been Delayed until December!
A few weeks ago, Fannie Mae and Freddie Mac’s announcement of a new guarantee fee (G-fee) for refinances shook the core of the housing industry. These fees will add an extra 50bps to refinance mortgage loans. That could be an additional $1500 on a $300k loan! The mortgage industry has experienced G-fees in the past, but at 50bps, this fee is an unprecedented amount! It’s twice as big as the last adverse market fee.
Thankfully, the overzealous implementation of these refinancing fees received backlash from lenders and borrowers. So much so that the Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to delay the start date from 9/1 to 12/1.
Before we can explain what this means for you as a homeowner, we’ll need to explain the reason for these fees.
What are G-Fees?
G- fees are collected by Fannie Mae and Freddie Mac (GSEs or agencies) in order to guarantee proper repayment to mortgage investors. So, if borrowers don’t pay, the GSEs will make sure investors get paid. This assurance makes mortgages more affordable and it makes credit more available to more people.
These fees are paid overtime directly from the lender/servicer to the GSEs and they are also collected upfront from borrowers depending on the risk factors of a given loan. To offset these upfront fees, borrowers can choose to pay a higher rate or they can opt to pay the fees in the form of higher closing costs to secure a lower interest rate. So, if a borrower with a lower credit score is buying an investment home, they may opt to pay higher closing costs to get access to the same rates as someone buying a home with 20% down and excellent credit.
What does that mean for you?
This means that the 50bps pricing hit for refinances will be removed from the pricing for now and will be reinstated on December 1st. However, that DOES NOT mean you’re safe from the fees if you start a refinance on November 30. In fact, starting your loan past the month of September could put you at risk for paying the additional fees. Due to the time it takes to get a loan from the closing table to the Agencies, we encourage all homeowners who are even remotely considering a refinance to do so ASAP before the refinancing costs go up!
Bottom line, If you’re on the fence about refinancing your current mortgage, it’s time to hop off and take action! Apply online and our team can you give accurate rates and not just estimates. Taking 10 minutes to apply now is worth saving thousands or tens of thousands on the life of your home loan.
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