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Mortgage giants Fannie Mae and Freddie Mac “will remove the adverse market refinancing fee on loan deliveries effective August 1, 2021,” states the Federal Housing Finance Agency. That means if you refinance your mortgage now you won’t pay that fee, which will likely save you money, experts say. You need to know that if you want to refinance yourself now, and Here you can compare today’s best refi prices.
What was the adverse market refinancing fee?
The adverse market refinancing fee was a 50 basis point fee charged by Fannie Mae and Freddie Mac to the lenders when they delivered the refinanced mortgages to the two mortgage companies; the fee was then often passed on to the borrower. The fee was introduced because: “When the pandemic brought high unemployment, regulators feared a foreclosure crisis would follow. The FHFA added a refinancing fee to top up Fannie Mae and Freddie Mac’s rainy daily allowances so they could afford an increase in foreclosures, ”said Holden Lewis, home and mortgage expert at NerdWallet.
There was no foreclosure crisis, however: “Only 2% of Fannie Mae and Freddie Mac loans allow that number to decline,” said Greg McBride, senior financial analyst at Bankrate. And now Frannie and Freddie have revoked the fee, which, according to the FHFA, “will help families cut their housing costs”. Find the best mortgage refinancing rates near you here.
How much can you save on a refi since there is no disadvantageous market refinancing fee?
“The removal of the fee will reduce refinancing costs for homeowners who have Fannie or Freddie loans over $ 125,000,” says McBride. He estimates that a borrower who refinances a $ 300,000 loan will see either a 3/4 percentage point lower interest rate, equivalent to about $ 20 a month, or over $ 1,500 less closing costs. (Some lenders added or added the 0.5% fee to the closing cost – on a $ 300,000 loan, that would add a $ 1,500 closing cost to the loan amount, others added the mortgage rate to get the fee back). “The fee waiver will benefit people who refinance themselves with mortgages backed by Fannie Mae and Freddie Mac,” said Lewis. Find the best mortgage refinancing rates near you here.
Should you refinance now?
McBride suggests this is a great opportunity to refinance and slash monthly payments sensibly, especially given the rising cost of so many other things: “The elimination of the FHFA fee makes refinancing even more compelling,” says McBride. And not only the cut in the fee could save you money, but also the super low rates that are now being offered for refinancing (Here you can compare today’s best refi prices).
Lewis says other reasons for a refi are “to reduce the loan period from say 30 years to 15 years in order to pay less interest over time” and “to get rid of FHA mortgage insurance, which in most cases cannot be canceled” . As a rule of thumb, says Lewis, it’s worth refinancing if you can cut the interest rate by three-quarters of a percentage point and plan to stay in the house for at least a few years to recoup any costs associated with a refi. All of these groups can benefit from the cancellation of the refinancing fee, especially since interest rates are at their lowest level since February. Compare today’s best refi prices here.