Last year, Fannie Mae and Freddie Mac (the state-sponsored companies that buy mortgages) began charging a 0.50% mortgage refinancing fee on loan amounts of $ 125,000 or more. The so-called Adverse Market Refinance Fee came at a time when the economy was shaky and the idea of ​​making mortgages was riskier.

This fee was never billed directly to individual refinancing candidates by Fannie or Freddie. Rather, this fee was charged to refinance lenders. However, these lenders largely passed this fee on to consumers, making it more expensive to swap an existing mortgage for a new one.

Last month, Fannie and Freddie announced that they would be removing their 0.50% refinancing fee. That decision was largely fueled by the fact that the proportion of Fannie and Freddie mortgages in the Tolerance had decreased significantly since the pandemic began. And unsurprisingly, the removal of this fee has led to a surge in refinancing requests.

In the week ending July 21, refinancing rose 31%, according to Black Knight, its highest level since early March. And there are more homeowners who can benefit from refinancing too. In fact, as of July 22nd, there were just over 15 million refinancing candidates who could seriously save money by refinancing. And since this fee was no longer in the picture, we could see a sustained increase in requests.

Should You Refinance Your Mortgage?

Now that the Adverse Market Refinance Fee is gone, it might be a good time to refinance your mortgage – especially with today's mortgage rates so low. But before you do this you need to ask yourself:

Will I reap enough savings to make the refinancing worthwhile? In general, refinancing makes sense if you can lower the interest rate on your mortgage by around 1% or more. If you already have a very low interest rate on your home loan, refinancing may not be worth it.

Am I eligible for a competitive refinancing rate? Typically, to get the best possible mortgage rates, you need a credit score in the mid to top 700. If your score isn't there, you may want to wait to refinance and apply as soon as you have a chance to increase that number.

Will I stay home long enough to cover my closing costs and stay ahead of the curve? You will be charged a number of refinancing fees. So you need to make sure you stay in your house long enough to make up for them.

For example, if a lender bills you $ 4,000 in closing costs to refinance a new loan that cuts your monthly payments by $ 200, it would take you 20 months to break even. You will begin to enjoy some savings on top of that. For example, if you don't want to move for three years or more, refinancing can make sense.

The elimination of the adverse market refinance fee makes refinancing a mortgage cheaper. Take your time to consider whether you should take out a new home loan. And once you do decide to apply, check out different lenders to see what rates and closing costs they are offering you.

source https://seapointrealtors.com/2021/08/10/refinance-applications-soared-after-removal-of-adverse-market-fee/

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