I'm in the middle of refinancing a rental property and am astounded at how complicated this whole process has been. In addition to mountains of paperwork, our lender is asking for nine months of payment reserves in a savings account, prepaid taxes and insurance, and $3900 in closing costs.
The one new fee that caught me totally off guard is a $500 "non-refundability of advance fee" which is secured against my credit card. This is a surprising new fee which I didn't learn about until our loan application arrived via courier. A "non-refundability of advance fee" is bank speak for the $500 penalty that will be charged against your credit card in case you have a change of heart about getting a loan.
Our loan officer didn't mention this non-refundable fee when he asked for my credit card number early in the loan process.
I suppose, however, it's only fair that a bank would charge a penalty to those who get cold feet only days before a refinance. After all, considering what is involved in processing an application plus the cost of appraisals and credit reports, the bank has a sizable amount of time and money invested in a client. A non refundable fee of this size will separate the "tire kickers" from those of us who are serious about lowering the interest rates on our existing mortgage.
What I don't like about this fee is that it isn't limited to just homeowners who change their minds after the process has begin. The fee will be assessed if the loan is cancelled for any reason. These reasons might include anything from a low appraisal to a mysterious cloud on the title or even a Home Owners Association litigation that no one even knew about until days before closing. This hardly seems fair to a home owner who enters into the loan process in good faith only to be rejected for something that was not their fault.
Higher closing costs, larger cash reserves, and the possibility of being charged a $500 cancellation fee is a far cry from the days when all it took to refinance your old mortgage was great credit and a copy of your tax statement. With these kind of costs, borrowers have to be serious about refinancing and accept that factors outside of their control may cost them money.
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