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Mortgage refinances now come with a new fee — but you can still get a deal

Ethan Rotberg
·3 min read
Mortgage refinances now come with a new fee — but you can still get a deal
Mortgage refinances now come with a new fee — but you can still get a deal

As mortgage rates have fallen through the floor again and again, borrowers have been hitting the interest rate jackpot.

Even so, if you’re looking to score an ultra-low rate to refinance an existing home loan, you might find it a little harder than you might imagine.

A new federal refinance fee has finally gone into effect, after many months of anticipation, and experts say lenders are rolling the cost into their mortgage rates.

But if you know how to look, you can still find a refinance rate low enough to slash your monthly mortgage payment and your lifetime interest costs.

What’s the deal with the fee?

Money bag home and man hands in sunlight represent to exchange or saving money or investing to buy a home or loan to buy a house or real estate or investment for the future.
thitikan chuachan / Shutterstock

The new 0.5% fee applies to conventional refinance loans of $125,000 or more. It was officially imposed on Dec. 1 by the Federal Housing Finance Agency, the regulator of government-sponsored mortgage giants Fannie Mae and Freddie Mac, which buy most U.S. home loans from lenders.

Fannie and Freddie say they need the money to offset losses related to COVID-19. The fee had originally been announced for Sept. 1, but it was postponed after an outcry from lenders.

Despite the arrival of the fee, 30-year mortgage rates have continued to drop and last week hit a new all-time low for the 17th time since March, Freddie Mac says. But refinancers may be wondering: What record-low rates?

“Homeowners looking to refinance their mortgage may not be quoted the ultra-low rates that are making the headlines of late," says Matthew Speakman, an economist with Zillow. It’s not just a matter of the new fee; lenders also view refinances as a bit riskier than other loan types.

“Lenders have little appetite for risk at the moment," says Speakman.

You can still land low rates

Image of cheerful african american woman using laptop while sitting on chair in living room
Dean Drobot / Shutterstock

But if you have an older loan and haven’t refinanced yet, it’s still worth your while.

“Refi rates are still incredibly low and, for many, it remains a great time to consider refinancing a home loan,” Speakman says.

Though average 30-year mortgage rates are currently below 2.7%, don’t be put off if you can’t find refi rates way down at those levels. Mortgage rates remain far below what they were at the start of the year — even with the new refi fee baked in.

“Rates continued to drop for purchases,” says Matthew Graham, chief operating officer of Mortgage News Daily. “But refi rates popped and dropped and popped again, depending on the lender.”

How to get a deal

There’s no super-secret trick to finding the lowest rates — it’s just a matter of knowing how to comparison shop. Research from Freddie Mac found that almost half of all borrowers never bother to shop around for their mortgage rate but just grab the first offer they see.

Instead, experts recommend comparing a minimum of five rate quotes to find the best offer available in your area and for a person with your credit score.

Even if you’re not quoted rock-bottom rates, you can save money elsewhere at home. Do more comparison shopping when you buy or renew your homeowners insurance. Get quotes from multiple insurers to find the lowest price for the coverage you need.