Beware of These Refinancing Fees

The word is that even if you aren’t buying a home, now is a good time to refinance. There are government programs designed to help people refinance, and mortgage interest rates are the lowest they’ve been in a looong time. With some mortgage interest rates at 4.65% (15-year fixed at my local credit union), it really does seem like now is the time to lock in the savings that come with refinancing to a lower rate. But, as with all financial decisions, you need to be careful. There are some refinancing fees that you need to watch out for.

Refinancing fees to watch out for

Anytime you get a loan, there is a chance that you will see an origination fee or a closing fee. Many mortgage lenders will waive these fees, but even so you might be charged something. Here are some costs that you should watch out for as you refinance your home:

1. Fannie Mae and Freddie Mac charge fees when they insure a loan or purchase a mortgage. These government institutions have raised their fees, and that means you will have to pay more. So, if you are taking advantage of the latest government program to help you refinance, be aware that you may have fees to pay to Fannie and Freddie. And, you should find out from your lender whether or not your loan will be sold to one of these institutions. If so, your mortgage lender is likely to pass the fees on to you.
2. Appraisal fees are charged when your home is assessed to determine its value. Some mortgage lenders, however, are paying these fees themselves in order to try and get business.
3. Processing fees are designed to milk a little more out of you. Check for these fees under such terms as credit check fee, underwriting charges, administrative fees or application fees.
4. Private mortgage insurance is charged when you have less than 20% equity. If you default, the mortgage lender is repaid the amount that you owe. PMI was being avoided with piggyback loans at the height of the real estate bubble. Now, though, mortgage lenders are reluctant to offer such “creative” solutions. This is one fee that will be hard to wriggle out of.

Before making a decision, you should shop around. You want to determine that you are get the best deal and paying as little as possible in mortgage loan fees. It’s impossible to refinance with no fees, but you should try to avoid as many of your fees as possible.

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