The current year is full of surprises, be it setting up a record for the highest unemployment percentage or be it the lowest interest rates of all times. The interest rates still threaten to climb up from the low lying digits; that being said, borrowing money was never so cheap or low on interest. No points for guessing; this has been a driving factor that numerous Americans want to get a piece of this borrowing spree of refinancing, with the hope that the monthly rates of mortgage payments can be lowered. But with the onset on the first of December, the rates might get a little expensive, and reaping the low rates will be no more be there, thanks to the new shift known as the Adverse Market Refinance Fee (FHA fee).

About the fee: 

The FNMA (federal national mortgage association), better known as Fannie Mae, has been predicted to lose almost 6 billion dollars because of the COVID-19 driven forbearances and defaults. To make up for those losses, the Adverse Market Refinance Fees has been brought into the picture; this essentially means that any loan given outpost the 1st of December will have a surcharge of 0.5%; this surcharge will be borne by the consumers who take the loan. So, technically, the consumers will pay 0.125 % extra or even up to 0.25% on their loan interest rate. These “fees” will essentially help the financial institutions make up for the previous losses, which could have been market losses and loss from servicing runoffs. This explanation is given by Jeff Greenberg, who is a loan officer working with the Guaranteed Rate.

Who pays this fee?

Any loan that will qualify for a transfer to FNMA for processing post the 1st of December will add a surcharge fee added to the pricing. So to put in as per the words of Erika York, who happens to be a senior mortgage advisor with Fairway Independent, if your term is about to end for the current refinance you have, you need not worry about the new fee if you happen to be one of those who has recently got a refinancing done, the spiked loan rate has already been added to your mortgage.

In plain words, if you have a loan that is over 125,000 dollars, and it is lesser than your county’s acceptable limits, your interest rates will be spiked.

Can this fee be avoided?

Here is the deal, if you can call your bank up immediately, you stand a chance to lock your interest rates without getting the additional interest charged to you because the deadline is yet to be reached for many financial institutions as the dates are different for different lenders, for example for the York’s bank it is 12th of October. It would be best to look around for your alternatives before picking up the pen to sign a deal. To give you an example, Fairway Independent allows the fee in the form of a tier that will allow the borrowers to get the best possible benefits.

Is refinancing worth it?

To paint the picture correct, with as little as 0.5% additional fees, your mortgage’s refinancing can be a sensible thing to do, understanding the math as 200,000 dollar mortgage will cost you about 1,000 dollars as the fee amount. As York puts it across, “with a spike of about 0.125%, there are many other reasons to get your mortgage refinanced”, so if you plan to take some money out to repay a debt or still want to be in your home for some time now, there are ample benefits to get into refinancing now.

It is always recommended you take the advice of a mortgage specialist and let them take care of the cost and benefit analysis for short and long-term savings from your refinancing venture. As York has put it across, “It is a manageable point to think to refinance. So to give an example, if a borrower has planned to move in a year and not recover the cost of refinancing, this idea makes no sense for them; however, if a borrower has a need to cash out to settle other debts with higher interest, knowing the fact that they are moving and freeing up the cash flows, it makes perfect sense.”

The idea is to discuss it with the lender and relook into the goals you have set for the times ahead; it is essential to ascertain if getting into the refinancing is the right choice.

Want To Refinance Your Home – Do It before the new Adverse Market Refinance Fee.