What Are the Costs of Refinancing a Mortgage?

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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 City. In case you haven't heard about us, you can save up to 6% in commission when you sell and up to 2% when you buy or more. Please check us out at https://www.hauseit.com

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 $1,100 or let’s just say around $1,000 on average as of this video. 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 $1,000. Typically, again the estimate we give is $900 to $1,100. You can expect around $1,000 on average. This fee please note 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 $1,000 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 up to $1,000. 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 $1,000 for the bank's attorney.

The next and biggest fee to be aware of is the title policy reissuance 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 says 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 an 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 $1,000. 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.

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