What’s the story with the fee?

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The 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 month hit the latest in a series of new record lows. But a refinancer may wonder: Where are these amazing mortgage 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

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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 2.75%, 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.”

Experts say with the fee baked in, the typical 30-year fixed mortgage rate for a refinance is one-eighth to one-quarter point higher than for a home purchase loan. So, a homebuyer doing a refi might get a rate of 3.0% on a mortgage that would come with a 2.75% rate for a homebuyer.

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 find other savings on your housing costs. 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.

About the Author

Ethan Rotberg

Ethan Rotberg


Ethan Rotberg is a staff reporter at MoneyWise. His background includes nearly 15 years as a writer, editor, designer and communications professional. He loves storytelling, from feature writing to narrative podcasts. His work has appeared in the Toronto Star, CPA Canada and Metro, among others.

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