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April 10th, 2009

How a Refi Could End Up Costing You



Thousands of Americans are flooding mortgage lenders’ offices hoping to save money by refinancing their mortgage to a new lower rate.

Yet there are several refinancing fees that could end up costing you. SmartMoney.com has compiled four refinancing costs to look out for:

1. Processing Fees: While they are a given part of the refinancing process, Smart Money warns that “While charging an application fee of several hundred dollars is normal, adding several other charges for the same amount of work is not. Be sure to compare several lenders’ fees — and question anything that seems redundant.”

2. Fannie and Freddie’s Cut: F&F raised their fees on April 1 of this year. “Depending on the borrower’s credit score and the size of the loan relative to the home’s value, these so-called loan-level price adjustments can range from 0.25% to 3% of the loan.” A general rule of thumb is, the lower your credit score, the more you’ll have to pay.

3. Appraisal Fees: Beginning on May 1, lenders who service Fannie and Freddie loans won’t be able to communicate with appraisers, so many lenders will be forced to collect appraisal fees up front. Also, appraisers are now required to use a special form that takes them longer to complete, driving up their hourly costs.

4. Private Mortgage Insurance: As we said earlier, the lower your credit score, the more you will pay in the long run. “…private mortgage insurance, or PMI, is getting more expensive for borrowers with lower credit scores, says Tom Taggard, a spokesman for PMI, a San Francisco-based mortgage insurer.”

When is it worth refinancing?

In the April 1 edition of “Bottom Line”, HSH Vice President Keith Gumbinger wrote that it’s generally best to refinance on when “Your current fixed-rate mortgage is high enough — at least 6.5%, based on current rates — that the savings from the lowered mortgage rate will allow you to recoup the price of closing costs in 24 months or less.”

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2 Responses to “How a Refi Could End Up Costing You”

  1. NY FHA Loans For Streamlined Refinance Mortgage | One Mortgage Refinancing Says: May 3rd, 2009 at 11:29 am

    [...] How a Refi Could End Up Costing You (hsh.com) [...]

  2. Does It Still Make Sense to Refinance in Today’s Market?- Financial Eyes & Ears Says: December 29th, 2009 at 8:45 am

    [...] says that it’s important to understand the costs involved in refinancing your mortgage. “The more it costs you to get your new loan, the longer it will take to recoup those costs. [...]

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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