New Mortgage Refinancing Fee

Adverse market fee goes into effect December 1, 2020

A new mortgage refinancing fee, known as the “adverse market fee,” is just around the corner—and it has caused both concern and confusion among many homeowners. As interest rates have again declined and homeowners look to save money through refinancing, many questions have arisen with the advent of the new mortgage fee for refinancing. We dug in to learn more about the refinancing fee and answer your questions.

What is the adverse market fee?

The adverse market fee is a new 0.5% charge on newly refinanced mortgages.

Why is there a new fee?

Fannie Mae^® and Freddie Mac^®—aka the National Mortgage Association and the Federal Home Loan Mortgage Corporation, the government entities that buy mortgages to keep interest rates low—put the fee in place to protect against possible risks or losses due to economic uncertainty related to the pandemic.

When does it go into effect?

The market fee was originally set to start September 1, 2020, then got delayed to December 1, 2020, to give people time to complete their already-in-progress refinancing.

If I refinance after December 1, how much will the fee add to my mortgage?

The answer depends on the amount of your refinanced mortgage. Here are some fast facts to help you determine how the rate could affect you:

• The fee adds .05% to the total loan payout.
• For the average mortgage, the fee will add $1,400.
• Mortgage refinancing savings will be reduced by about $15 per month—so if you were cutting your mortgage costs by $100 per month, it will now be $85.

However, depending on the size of your loan, you may not have to worry about this fee at all.

How can I avoid the refinancing fee?

The fee doesn’t apply to every loan:

• Balances under $125,000 will be exempt from this cost.
• Jumbo loans—which usually amount to $765,600 or more in New Jersey—also won’t be affected.

You can also request that your mortgage lender absorb the fee.

Should I refinance right away to avoid the adverse market fee?

Start by checking the date.

Refinancing a mortgage can take anywhere from 30 to 45 days and sometimes longer. If you haven’t started the refinancing process, you may miss the window.

If you’re already working with a lender on refinancing and haven’t discussed the new mortgage fee, verify with them that you’ll be able to complete the process before December 1.

Should I still refinance even if I can’t finish before December 1?

It will depend upon your circumstance.

Move forward with refinancing if:

• Your loan is too small ($125,000 or under) or too large ($765,600 or more) to be affected
• Your new interest rate will still save you money over the life of your loan, even with the extra fee

Considering keeping your current mortgage if:

• The additional fee will result in you paying more for your refinanced mortgage

Interested in refinancing? Let’s talk soon!

If you have more questions about mortgage refinancing, check out our blog on the topic. If you’d like to see whether refinancing is for you—especially before the refinancing fee goes into effect—let us know. We can help you refinance your mortgage. Contact us today to schedule a phone or Zoom® appointment with our bilingual staff—and we’ll walk you through your next steps.