Good News for Refinancing, but You'll Need to Move Fast
With interest rates at record low levels, many homeowners have refinanced their mortgages, thereby reducing their monthly payment amount and potentially saving tens of thousands of dollars in interest fees over the life of the loan.
However, earlier this month, Fannie Mae and Freddie Mac reported that they would implement a new 0.5% mortgage refinancing fee on conforming loans in September. Most industry experts predicted this new fee would be passed on to the consumer.
On the surface, 0.5% seems like a small number. However, it can add a noticeable increase in the cost to refinance. For example, it equates to an extra $1,500 fee on a $300,000 loan.
There is good news if you've been thinking about refinancing but have yet to take action. On August 25th, they updated information about the new fee:
- The new 0.5% mortgage refinance fee won't be implemented until December 1st.
- Those with refinancing loans below $125,000 are exempt from the fee altogether.
You need to move fast if you want to avoid this fee, given that completing the refinancing process and getting approved can take upwards of 60 days, at best.
You'll also want to prepare before starting the application process. Access your credit reports to make sure information is reported accurately. If you find errors, follow the dispute procedures. It is also a good idea to check out your FICO® Scores. Make sure you are accessing the following versions that are used within mortgage loan refinancing evaluation:
- FICO Score 5 based on Equifax data
- FICO Score 4 based on Transunion data
- FICO Score 2 based on Experian data
Don't procrastinate!
Tom Quinn is the Vice President of Business Development for myFICO and has over 25 years of experience working with consumers, regulators, and lenders regarding credit related questions and initiatives.