Many homeowners were recently given an incentive to refinance their mortgage, after President Joe Biden’s administration on Friday removed the controversial adverse market refinance fee, which was added in 2020 and tacked on to refinanced mortgage loans backed by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.
The 0.5% fee was put in place during the coronavirus pandemic to help ease the financial burden that the GSEs faced. Both companies set up policies to help homeowners struggling to make their mortgage payments. But after Aug.1, 2021 that fee will cease to exist, and more homeowners can save money by refinancing their mortgages.
With mortgage rates below 3% and near all-time lows and the refinance fee removed, homeowners could save hundreds of dollars by taking advantage of the low-rate environment and refinancing their mortgage. Visit Credible to get started today before rates begin increasing and see how much you could save.
How much will homeowners save?
The Federal Housing Finance Agency (FHFA) stated it will remove the adverse market refinance fee at the beginning of August, but many homeowners could see the savings by refinancing right now. That’s because it takes 35 days on average to close on a mortgage refinance, by which time Aug. 1, 2021 will have already passed, and homeowners will not have to pay the added fee.
"Friday's announcement by the FHFA is great news for homeowners," Credible Chief Revenue Officer Robert Humann said. "This is a sign of a recovering economy and optimism from GSEs that the worst of the pandemic is behind us."
On average, homeowners looking to refinance their homes will save about $1,400 with the fee's removal, according to a statement from the Mortgage Bankers Association (MBA) in August 2020. At that time, the company described the fee as an "ill-timed, misguided directive."
"Following Friday's announcement, interest rates fell to a five-month low which is even better news for homeowners looking to refinance," Humann said.
Interest rates for a 30-year fixed-rate mortgage decreased to 2.88% in the latest weekly Freddie Mac Primary Mortgage Market Survey. With interest rates dropping and the refinance fee gone, homeowners who bought as recently as 2019 or even early 2020 could get a lower interest rate and save hundreds on their monthly payment by refinancing. Visit an online marketplace like Credible to use a mortgage calculator and find out how much you could save.
Homeowners are now reaping the benefits
The FHFA was able announce an early conclusion to the fee, the agency said, because of improving market conditions and a change in its priority agenda.
"MBA applauds [FHFA] Acting Director Sandra Thompson’s decision to eliminate the adverse market refinance fee," MBA CEO Bob Broeksmit said in a statement. "We have called on FHFA to rescind this policy and appreciate that they have reviewed the data and been responsive to our request. With less than 2% of GSE loans in forbearance and continued home price appreciation resulting in significant borrower equity, there is no need for the fee."
Now, with the fee gone, homeowners are seeing the most benefit. Months, if not years, will be shaved from the timeline for the break-even point for prospective borrowers looking to refinance, Credible explained.
See how you could benefit from the fee's elimination by visiting Credible and comparing mortgage refinance loan options from multiple lenders at once. Check out the online marketplace and get pre-approved in minutes without affecting your credit score.
How can a mortgage refinance save me money?
- Lowering monthly payments: Refinancing your mortgage can save you money on your monthly payments by lowering your interest rate, and therefore the total amount you pay each month. The removal of the adverse mortgage refinance fee simply means that there won't be an added cost in order to refinance and take advantage of historically low interest rates.
- Cash-out refinance options: With home prices surging to record highs, taking out a cash-out refinance is also a viable option. Consider pulling out the equity in your home to consolidate high-interest debt and eliminate other payments.
- Changes in your loan term: When you refinance, you can change the terms of your loan. This includes reducing your interest rate, but can also include things like eliminating mortgage insurance, switching from an FHA mortgage to conventional, increasing or reducing the years in your loan term or adjusting to a fixed rate or adjustable rate. A lender can walk you through these options and show you how to save money through each.
If you are interested in seeing what options are available to you, contact Credible to speak to a home loan expert and get all of your questions answered.
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