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May 23, 2023 by Brett Tams

While most homeowners probably don’t have a refinance on their radar (due to the big jump in interest rates), take note that fees for cash out refis are going up in about a month.

Back in October, Fannie Mae and Freddie Mac announced new loan-level pricing adjustments (LLPAs) for cash out refinances.

The move was intended to help the Federal Housing Finance Agency (FHFA) better support “core mission borrowers,” aka promoting affordable housing.

That same announcement included the elimination of upfront fees on HomeReady and Home Possible loans, and for first-time home buyers with limited incomes.

Those fee reductions went into effect December 1st, but the increased cash out fees don’t go live until February 1st, 2023.

Cash Out Refinance Fees More Than Doubling in Some Cases

cash out LLPAs

There aren’t a ton of reasons to refinance at the moment, given the doubling in mortgage rates from the start of 2022 until now.

But those in need of cash might consider a cash out refinance depending on the circumstances.

Unfortunately, these transactions are set to get even more expensive come February 1st, 2023.

The FHFA, which oversees both Fannie Mae and Freddie Mac (roughly 80% of the mortgage market), said it has “targeted increases to the upfront fees for most cash-out refinance loans.”

As you can see from the chart above, LLPAs will be more than doubling in some cases on cash out refinances.

For example, a borrower with 740 FICO score and an 80% loan-to-value (LTV) ratio will see the LLPA for cash out rise a full percentage point.

On a $500,000 loan, we’re talking another $5,000 in upfront fees, which would likely translate to a higher interest rate instead of paying/deducting that amount from loan proceeds.

That could raise your interest rate .25% to .50% depending on the lender, making the cash out refinance even more unattractive.

Simply put, LLPAs are typically absorbed via a higher mortgage rate instead of being paid out-of-pocket.

Wait to Cash Out If Your FICO Score is Below 660?

Meanwhile, borrowers with FICO scores between 620-660 will see their cash out refinances become cheaper in many cases.

Looking back at that chart, a borrower with a 625 FICO score and an 80% LTV will see their LLPA fall from 3.125% to 2.125%.

So for this hypothetical homeowner, there’s a case to be made to wait to cash out if you’re thinking about doing so.

This borrower would actually see their cash out refinance become cheaper, which is essentially the rationale behind these changes.

Borrowers who are ostensibly more in-need will see pricing relief, while more creditworthy borrowers will pay a premium.

This reminds me of the catch-22 that is risk-based pricing on mortgages. The most at-risk borrowers, due to low credit scores and down payments, often get stuck with the highest mortgage rates.

That equates to a higher monthly payment, which increases their risk of default. And they’re already the riskiest borrowers to begin with!

These changes by the FHFA might be one way of addressing that issue.

A Good Credit Score Will Still Save You Money on Your Mortgage

credit score LLPAs

While I explained that those with low FICO scores could benefit by waiting to cash out, there’s a catch.

There is also an LLPA for credit score for all transactions, which is much more expensive for borrowers with low FICO scores.

For example, a borrower with a 620 FICO and an 80% LTV is hit with a 3% LLPA, while the borrower with a 740 FICO and 80% LTV only pays .50%.

That’s a full 2.50% higher for the low-FICO borrower, which more than makes up for those positive cash out LLPA changes.

In other words, you’re typically going to save more money on your home loan by coming to the table with the highest credit score possible.

But if you just can’t get your credit score to budge, it could become cheaper to pull cash out of your home once these changes are implemented.

Another point about waiting to refinance is that timing the market is a fool’s errand. We don’t know where mortgage rates will be next week, let alone next year.

These latest changes are on top of the increased LLPAs for second homes and investment properties announced earlier in 2022.

Source: thetruthaboutmortgage.com

Posted in: Mortgage News, Mortgage Rates, Refinance, Renting, Starting A Business Tagged: 2, 2022, 2023, About, affordable, affordable housing, All, Announcement, big, borrowers, buyers, Cash-Out Refinance, Credit, credit score, credit scores, Down payments, expensive, Fall, Fannie Mae, Fannie Mae and Freddie Mac, Federal Housing Finance Agency, Fees, FHFA, fico, fico score, Finance, Financial Wize, FinancialWize, Freddie Mac, good, good credit, good credit score, home, home buyers, home loan, Homeowner, homeowners, homes, Housing, housing finance, interest, interest rate, interest rates, investment, Investment Properties, jump, Live, LLPAs, loan, Loans, low, making, market, money, More, more money, Mortgage, mortgage market, Mortgage News, MORTGAGE RATE, Mortgage Rates, Mortgages, Move, new, Other, payments, premium, Raise, rate, Rates, Refinance, rise, risk, Risk-based pricing, save, second, second homes, time, timing, timing the market, value, will

What Is a Cash Out Refinance?

March 25, 2023 by Brett Tams

Have you ever heard the phrase “using your house like a piggy bank” and wondered how exactly that works? The answer: a cash out refinance. A cash out refinance lets you pocket some of the value of your home. You … Continue reading →

The post What Is a Cash Out Refinance? appeared first on SmartAsset Blog.

Posted in: Mortgage, Refinance, Starting A Business Tagged: 2, 2023, 429, advisor, All, apple, ask, author, Bank, basics, before, Benefits, big, Blog, Borrow, borrowers, brooklyn, Budget, build, Built, Buying, Cash-Out Refinance, categories, cats, closing, closing costs, columbia, cons, cost, Credit, credit card, Credit Card Debt, credit cards, data, Debt, Debts, decades, entry, equity, estate, existing, experience, facebook, Fees, Financial Advisor, Financial Literacy, Financial Plan, Financial Wize, FinancialWize, Free, funds, future, get started, goals, good, Google, home, home buying, home equity, home renovations, homebuying, house, id, index, interest, interest rate, interest rates, interview, investments, job, jump, lenders, Life, loan, LOWER, Main, Make, making, Media, meta, mobile, money, More, more money, Mortgage, MORTGAGE RATE, Move, net worth, new, News, opportunity, or, Other, payments, plan, Planning, points, property, property taxes, pros, Pros and Cons, rate, Rates, ready, Real Estate, reddit, Refinance, refinancing, renovations, retirement, return, right, risk, Saving, saving money, Sell, selling, Selling Your Home, simple, smart, social, Style, tax, tax benefits, taxes, time, tips, title, tools, Twitter, under, value, wall, Wall Street, work

What Is Refinancing?

March 25, 2023 by Brett Tams

When you refinance, you replace your current mortgage with shiny new one. Your new mortgage could have a longer or shorter term, be adjustable-rate or fixed-rate. The refinance decision will likely involve large sums of money, so it’s good to … Continue reading →

The post What Is Refinancing? appeared first on SmartAsset Blog.

Posted in: Mortgage, Refinance, Starting A Business Tagged: Blog, brooklyn, Buying, columbia, decision, Financial Literacy, Financial Wize, FinancialWize, fixed, good, home, home buying, home loan, money, Mortgage, new, News, or, rate, Refinance, refinancing, retirement, simple, will, work

FHA Limits Cash Out Refinances to 85 Percent

January 26, 2023 by Brett Tams

The FHA, which has seen its share of scrutiny as of late, plans to lower the maximum loan-to-value associated with cash-out refinances beginning April 1. The agency, which previously allowed cash out refinancing up to 95 percent, will drop that limit to 85 percent, according to a letter sent to clients late last week. “Effective… Read More »FHA Limits Cash Out Refinances to 85 Percent

The post FHA Limits Cash Out Refinances to 85 Percent appeared first on The Truth About Mortgage.

Posted in: Mortgage News, Refinance, Renting, Starting A Business Tagged: ATM, before, Cash-Out Refinance, country, Department of Housing and Urban Development, down payment, Down Payment Assistance, FHA, FHA loans, Financial Wize, FinancialWize, foreclosure, General, history, house, House Financial Services Committee, Housing, Housing market, industry, loan, Loan Limits, Loan origination, Loans, LOWER, market, More, Mortgage, Mortgage News, new, Origination, portfolio, Refinance, refinancing, risk, seller, summer, title, volume, will

Can I Refinance a Mortgage With Negative Equity?

January 25, 2023 by Brett Tams

Mortgage Q&A: “Can I refinance a mortgage with negative equity?” Nowadays, more and more homeowners are finding that their condo or home value isn’t worth what it once was at the height of the real estate market. In fact, many are discovering that their current mortgage balance(s) now exceeds the value of their property, putting… Read More »Can I Refinance a Mortgage With Negative Equity?

The post Can I Refinance a Mortgage With Negative Equity? appeared first on The Truth About Mortgage.

Posted in: Mortgage Tips, Refinance, Renting, Starting A Business Tagged: action, affordability, affordable, agent, All, amortization, ARMs, Auto, Auto Loans, balance, Bank, bank accounts, banks, before, big, bills, calculator, closing, closing costs, commissions, condo, Credit, credit cards, Crisis, down payment, equity, estate, existing, Fannie Mae, FHA, FHA loan, Financial Wize, FinancialWize, Foreclosures, Freddie Mac, good, government, home, home equity, home loan, home loans, Home Price, home prices, home value, Home Values, Homeowner, homeowners, homes, Insurance, insurance premiums, interest, investment, investment property, Learn, lenders, loan, loan modification, loan programs, Loans, low, low mortgage rates, LOWER, Make, market, More, Mortgage, mortgage lenders, mortgage loan, mortgage payments, MORTGAGE RATE, Mortgage Rates, mortgage refinance, Mortgage Tips, Mortgages, offers, Other, payments, principal, programs, property, property values, Purchase, rate, Rates, Real Estate, real estate agent, Refinance, refinance your mortgage, refinancing, renting, savings, second, second home, security, Sell, student, Student Loans, town, traditional, under, Underwriting, USDA, VA, wants, will

FHA Short Refinance Program to Launch Next Month

January 24, 2023 by Brett Tams

More relief is on the way for underwater borrowers, assuming mortgage lenders agree to take part in the voluntary program. On September 7, HUD will begin offering FHA loans to certain underwater non-FHA borrowers who are current on their existing mortgages via the FHA Short Refinance program, originally unveiled back in March. In order to… Read More »FHA Short Refinance Program to Launch Next Month

The post FHA Short Refinance Program to Launch Next Month appeared first on The Truth About Mortgage.

Posted in: Mortgage News, Refinance, Renting, Starting A Business Tagged: affordable, balance, Credit, credit score, equity, existing, FHA, FHA loans, Financial Wize, FinancialWize, home, homeowners, HUD, launch, lenders, liens, Life, loan, Loans, More, Mortgage, mortgage lenders, Mortgage News, mortgage relief, Mortgages, new, principal, property, property values, Refinance, running, second, second mortgages, Treasury, under, Underwriting, will

Senators Urge Passage of Underwater Refinance Program

January 23, 2023 by Brett Tams

A bipartisan group of 16 Senators urged the Obama administration to remove barriers that have kept underwater homeowners stuck with inflated mortgage rates. In a letter to HUD secretary Shaun Donovan, Treasury secretary Tim Geithner, and FHFA director Edward DeMarco, the group spelled out the legislation needed to make such a program work. First, the… Read More »Senators Urge Passage of Underwater Refinance Program

The post Senators Urge Passage of Underwater Refinance Program appeared first on The Truth About Mortgage.

Posted in: Mortgage News, Refinance, Renting, Starting A Business Tagged: All, banks, big, Credit, credit score, decision, Economy, equity, expensive, Fall, Fannie Mae, Fannie Mae and Freddie Mac, Fees, FHFA, Financial Wize, FinancialWize, Freddie Mac, Giving, home, home equity, homeowners, HUD, interest, interest rate, interest rates, Legislation, lenders, list, LLPAs, loan, Loans, low, low mortgage rates, LOWER, Make, making, money, More, more money, Mortgage, mortgage lenders, Mortgage News, mortgage payment, Mortgage Rates, Mortgages, new, offer, plan, rate, Rates, Refinance, refinancing, risk, savings, second, second mortgages, Treasury, walking, will, work

What Is a Cash-In Refinance? Lower Your Loan Balance and Your Mortgage Rate

January 22, 2023 by Brett Tams

If you’re currently the proud owner of a mortgage, you’ve undoubtedly heard of a cash-out refinance, one that allows you to tap into your home equity. They were quite popular during the housing boom, when homeowners serially refinanced and simultaneously pulled “cash” from their homes while property values skyrocketed. You may have also heard the… Read More »What Is a Cash-In Refinance? Lower Your Loan Balance and Your Mortgage Rate

The post What Is a Cash-In Refinance? Lower Your Loan Balance and Your Mortgage Rate appeared first on The Truth About Mortgage.

Posted in: Mortgage Tips, Refinance, Renting, Starting A Business Tagged: All, Alternatives, assets, ATM, balance, before, Cash-Out Refinance, closing, closing costs, Distressed, diversify, Emergency, equity, Financial Wize, FinancialWize, funds, good, government, home, home equity, home loan, home prices, Homeowner, homeowners, homes, Housing, Insurance, interest, interest rate, interest rates, investment, lenders, Life, loan, loan pricing, low, low mortgage rates, LOWER, money, More, Mortgage, mortgage balances, mortgage interest, Mortgage Interest Rates, mortgage lenders, mortgage payment, mortgage payments, MORTGAGE RATE, Mortgage Rates, mortgage refinancing, Mortgage Tips, Mortgages, Move, Other, party, payments, Popular, programs, property, property values, rate, Rates, Refinance, refinancing, retirement, retirement account, traditional, will

Obama’s State of the Union Reveals Little About Mortgage Plan

January 21, 2023 by Brett Tams

So amid all the endless clapping and standing ovations, Obama did manage to get a few words out about the prospective mass mortgage refinancing plan during his State of the Union address last night. While it wasn’t a lot, it does give us something to chew on. During his address, he said the word “mortgage”… Read More »Obama’s State of the Union Reveals Little About Mortgage Plan

The post Obama’s State of the Union Reveals Little About Mortgage Plan appeared first on The Truth About Mortgage.

Posted in: Mortgage News, Refinance, Renting, Starting A Business Tagged: All, Crisis, Deals, Democrats, Fannie Mae, Fannie Mae and Freddie Mac, Financial Wize, FinancialWize, Foreclosures, Freddie Mac, General, Homeowner, homeowners, Housing, housing crisis, Law, lending, More, Mortgage, mortgage lending, Mortgage News, mortgage payments, mortgage refinance, mortgage refinancing, Mortgages, News, payments, plan, pressure, products, Refinance, refinancing, save, second, tax, traditional, Underwriting, wants, will, work

Obama Urges Passage of New Refinance Bill

January 20, 2023 by Brett Tams

If you happened to catch last night’s State of the Union speech, you may have noticed (between the incessant clapping) President Obama’s mention of a bill that would give American homeowners the chance to save $3,000 annually by refinancing their mortgages. While it was his only mention of “mortgage” on the night, at least it… Read More »Obama Urges Passage of New Refinance Bill

The post Obama Urges Passage of New Refinance Bill appeared first on The Truth About Mortgage.

Posted in: Mortgage News, Refinance, Renting, Starting A Business Tagged: 2, action, All, buyers, Competition, couple, Democrats, desk, Employment, Fees, Financial Wize, FinancialWize, home, Home Values, Homeowner, homeowners, house, ideas, Income, items, More, Mortgage, Mortgage News, Mortgages, new, Other, president, Refinance, refinancing, save, second, white, will
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