Mortgage interest rates have been below 3% for several months now, giving buyers more purchasing power and helping them to offset the increase in housing prices. Buyers aren’t the only ones who should take advantage of these rates. If you can reduce your current interest rate by .05% or more, you’d be wise to consider refinancing. But you shouldn’t wait! On August 12th, Fannie Mae and Freddie Mac implemented a .05% adverse-market fee – or surcharge – on loan refinances. Fannie and Freddie are not lenders themselves – instead, they purchase loans from lenders, package them into mortgage-backed securities, and sell them to investors. According to the Federal Housing Finance Agency, the fee is necessary to cover projected Covid-19 losses of at least $6 billion. The agency says most of that is likely to come from homeowners defaulting on their loans during the current recession. This fee was basically sprung on lenders and put many in an awkward position of not being able to offer rates they’d promised to customers. This surcharge has now been delayed until December 1, 2020, giving those looking to refinance more time to capture the benefits of refinancing. Who is a Good Candidate for Refinancing?
Your income or credit score has gone up since your original loan.
You had less than 20% equity at the time of purchase and been paying private mortgage insurance (PMI). If your home has increased enough in value, as evidenced by a current appraisal, refinancing can eliminate the PMI.
You’ll save at least .05% on your interest rate.
For more information on whether refinancing will benefit you, click here:
https://www.sofi.com/blog/who-is-a-good-candidate-for-mortgage-refinancing/#:~:text=If%20your%20income%20or%20credit,term%20on%20a%20mortgage%20refinance.
The extension to December 1st does not mean you have 3 months to refinance without paying the adverse market fee, however. Lenders will need time to sell and deliver your loan to Freddie Mac or Fannie Mae — a process that can take up to 60 days. Bottom line: if you have about a month to lock in the lowest rate if you’d like to beat the fee. The time is now to start gathering and comparing mortgage offers from a least a few lenders to find the lowest rates available to you.
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