As mortgage rates continue to hit historic lows during the pandemic, new mortgage refinancing fees are expected to rise an additional 0.5%. However, as per the Fannie Mae and Freddie Mac institutions, the new prices will only apply after December 1, 2020, giving homeowners more time to refinance. As refinance mortgages take between 30 and 45 days to close, now is the best time to get a head start on the process.
Why Are Refinance Mortgage Fees Changing?
To account for the risks and uncertainties during the pandemic, Fannie Mae, as stated in Lender Letter LL-2020-12, says that the new fee is a loan-level price adjustment (LLPA) known as an Adverse Market Refinance Fee. As under- and unemployment rises in the U.S., the Fannie Mae institution is also at risk of incurring costs.
On the other hand, Freddie Mac has erected a new program called the Market Condition Credit Fee in Price as a response to the economic crash. The new fees are a method of risk management and loss forecasting.
Where the New Fees Apply
The new fees will apply primarily to cash-out, and no-cash-out refinances, along with select construction conversion mortgages. Some specialty loan programs may become subject to the new fees—even those with a fee cap.
The new fee, however, won’t apply to new home purchases or mortgage refinances, not under Fannie Mae or Freddie Mac. VA Loan Streamline Refinances, for instance, fall under Ginnie Mae and won’t have to adhere to the new fees. Though similar in structure and characteristics to Fannie Mae and Freddie Mac, Ginnie Mae loans are a lower risk as they are fully backed by the government.
How Much Will the New Fees Cost Homeowners?
According to the Mortgage Banking Association, the new fees will charge the average homeowner $1,400 than what they would’ve typically paid. In layman’s terms, the cost will add $500 per $100,000 borrowed within a loan.
When is the Best Time to Refinance a Mortgage?
With this information in mind, you may be at a loss for when to refinance in Los Angeles. Considering the December 1, 2020 effectivity date, the best time to get your refinancing application is now. For banks to take your loan through post-closing procedures, you’ll need to have closed the loan anywhere between 15 to 30 days before the deadline. If you’re unsure about your deadline, consult with your lender.
Mortgage Refinancing in Los Angeles with Shannon Christenot
Refinancing your mortgage is an excellent way to save money over time. However, its associated closing costs can set you back initially, running from 1 to 3% of the total cost of your mortgage. These closing costs might span a loan origination fee, underwriting fees, and local fees, among other things.
After the December 1 deadline, an additional fee of 0.5% can damage your financial health, making it essential to undergo the refinancing process beforehand. As the best mortgage company in Los Angeles, our mortgage refinancing experts at Shannon Christenot can help you navigate a volatile Los Angeles market. Are you worried about missing out on low mortgage rates? Don’t—we’ll make sure you get on them quickly! Call us now at (818) 601-2231.