What are the costs of refinancing a mortgage?
We will demystify this topic on the following video.
My name is Chris at Hauseit.
Hauseit is the largest For Sale by Owner and Buyer Commission Rebate company in New York
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The first fee or cost to be aware of is a Bank processing or application fee.
In industry parlance, this is typically known as a basic bank fee.
The fee for this will vary but typically range from $900 to $1100 or lets just say around
%1000 on average as of this viewing.
This fee goes to the bank and covers the cost of processing your refinancing application.
The second fee to be aware of is an Appraisal fee.
As you can imagine, any time a bank lends on a property even if it is for a refinancing.
An appraisal will need to be done so the bank will know that it is lending against a reasonable
value or reasonable collateral.
The cost of an appraisal, at least in New York City can range up to $1000.
Typically, again the estimate we give is $900 to $1100.
You can expect around $1000 on average.
This fee please not is one of the few that are asked to be paid upfront.
If however, for some reason your application is declined banks will be generally very good
about refunding you this fee if that happens.
We say this fee is typically paid upfront because all other costs and fees associated
with a refinancing can typically added on to the new mortgage balance if you have enough
home equity on your loan.
So truly the appraisal fee of around $1000 is the only one that you have to pay out of
pocket and they'll typically ask for it within 2 or 3 weeks of the application process.
The next fee to be aware of is the Bank's Attorney fee.
This fee also ranges to $1000.
In the past, pre-financial crisis, mortgage bankers could typically call up attorneys
that they have good relationships with to ask for discount perhaps for a favor client
and attorneys were happy to accommodate.
However, post-financial crisis, attorneys are now auto-assigned for transactions.
As a result, there is little to no negotiation and the fee is quite static and has crept
up over the years but you can expect to pay around $1000 for the bank's attorney.
The next and biggest fee to be aware of is the Title Policy Re-issuance fee.
Now, you will be surprised to hear that this fee can be quite or almost as much as the
initial title insurance premium you might pay for a new purchase.
This business of reissuing a Title policy is very good business for title companies.
Well because the amount of work is relatively reduced if it say refinancing within a new
lender they simply change the name of the lender they might do a new title search but
the fee is quite similar to a new purchase as we discussed.
Of course, that actual cost is a complicated formula that's somewhat of a industry kept
secret.
This title policy re-issuance fee has a fixed and floating component.
This means that as the loan size increases the fee will necessarily also increase.
From studies we've done of recent transactions in New York City and in New York Metro area
as well as counties in Westchester, we've come to the conclusion that the average fee
is 0.4% of the loan amount.
The next and last fee to be aware of is a CEMA processing fee.
This fee would typically be under $1000.
For example, for a recent condominium refinancing transaction for a loan amount of approximately
$700k the CEMA fee charged by the bank who will be assigning a loan was around $600.
Keep in mind that the fee is levied by the old bank that will be assigning a loan to
the new bank.
The new bank who your mortgage will be with does not charge a fee typically for this process.
Now quickly, just what is a CEMA?
Well, a CEMA is a transaction that allows your former bank or the former holder of a
mortgage to assign the note to a new bank.
By doing so you are able to avoid partially or all of the mortgage recording tax in New
York which is a significant closing costs.
For refinancing, its typical for banks to agree to do CEMAs and thus prevent a significant
tax in the form of the mortgage recording tax for refinancing.
So there you have it.
We hope you found this video helpful and just as an example if you add all of these costs
up together for a typical transaction you might see somewhere around 1% of the total
loan cost for total refinancing fees.
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If you have any further questions send us an email team@hauseit.com.
If you're buying or selling property in New York City we can help you save on broker commissions
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