A new Federal Housing Finance Agency fee could mean your next mortgage refinance will be a little more expensive than you hoped.
Beginning this month, the agency is assessing a 0.5% fee on lenders for newly refinanced mortgages.
The fee itself is designed to help Fannie Mae and Freddie Mac cope with losses stemming from the coronavirus pandemic. The Federal Housing Finance Agency oversees the two mortgage giants, which back millions of U.S. mortgages.
Under the federal CARES Act passed in March, homeowners facing a coronavirus-related hardship have been able to suspend mortgage payments. As a result, Fannie Mae and Freddie Mac have incurred more than $6 billion in losses.
The fee itself may not be obvious to all borrowers. Tony Grech, senior mortgage loan officer at Luxury Mortgage Corp., told Yahoo Money:
“Most applicants will not see the fee as a cost or points charged to them. The refinance fee will be reflected in the interest rate rather than the fees. To the average borrower, this equals .125% to .25% higher in rate.”
The fee will add $500 to the cost of every $100,000 a homeowner borrows, not including interest.
Some homeowners may be able to escape the added cost altogether, as loans of less than $125,000 are exempt from the fee.
Others who will be exempt from the fee include:
- Borrowers with nonconforming mortgages, which are loans that don’t meet Fannie Mae and Freddie Mac guidelines. In most of the U.S., conforming loan limits for one-unit properties is $510,400 in 2020 and will be $548,250 in 2021.
- Borrowers who refinance into government mortgages backed by the Federal Housing Administration, Department of Veterans Affairs or Department of Agriculture.
Reports also suggest that some lenders may pay the fee themselves instead of passing it on to borrowers.
Mortgage rates remain near all-time lows, and a refinance still might make sense for you, even in light of the new fee. For more, check out “6 Tips for Refinancing Your Mortgage During the Pandemic.”
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