We are looking to Refi an investment property but have been quoted $4500 to $6300 for closing costs. Goal for Refi is getting rid of Mortgage Insurance currently have 4.87 int. rate was hoping to find around $2500 for Closing Costs. Any suggestions? Thx
Linda, I don't think anyone can truly quote you a low closing cost. Closing costs isn't set like a fee. It depends on several factors, including when in the month you close, how many points you choose to take, etc. For instance, closing at the beginning of the month will lead to a larger "days interest" on your new loan and hence a larger closing cost.
The only thing I ask for when I finance or refinance are the fees. Closing cost items such as a escrow fees, title fees, lender fees, appraisal are better able to be predicted and that is what you can compare from one lender to the next.
I was quoted about $2k (not including escrow) yesterday to close at 4.25% with no points at Iberia Bank. I don't think they are nationwide though. Also, you might check out amerisave.com. We purchased a property with them and it went well.
Closing costs are relative to the interest rate. Contrary to what people may think, or what you may hear advertised, there is no such thing as a no closing cost loan. There are always closing costs. The question is, who pays for those costs. Let me explain.
For example, typical closing costs are about $2000 for a refi, which includes the appraisal fee, lender fees, and title fees (this can vary from state to state). Brokers may charge a little more since they aren't the ones lending the money. For this example, let's use today's 30 year conventional rate for SFD investment property, 4.125%***. So at 4.125% today, your costs would be around $2000. However, if you chose 4.375% for example, I could give you a lender credit and pay all of your closing costs, which would result in zero costs to you (which is what is erroneously called a no closing cost loan). Conversely, you could choose to have a lower rate, like 3.875%, and pay additional costs, which are known as points or origination fees. These would be on top of the standard costs, in order to purchase a lower rate. There are valid reasons to choose any of the above options, depending on how long you plan to have the loan for.
Now $4500 to $6300 sounds really high, which leads me to believe that either you would be paying points, that those include escrows and prepaids, or that you are getting hosed. Hopefully not the latter! Also higher costs and forced points can be common with investment properties if any of these factors apply: high LTV, low loan amount, low credit score, condo or 2-4 unit property. Each of these factors come with a pricing adjustment, what's called a LLPA (loan level price adjustment). Lenders commonly have a ceiling rate, and once you hit it, there is no way to factor those adjustments into the rate anymore, so you could be forced into paying additional points.
It's always good to check with multiple lenders and make sure you are getting the best overall rate/cost scenario available. I have always found transparency is critical in developing long term relationships.
Hope that helps!
***Disclaimer, I am not quoting rates, this is for informational purposes only to explain rates versus fees. Actual rates are subject to evaluation of credit score, loan-to-value, loan amount, loan term, property type, occupancy, state, and other factors.
Thanks Zach for answering my questions. The lenders did say our LTV is 47. Maybe we need to wait another year to refi. What do you think? Thx again
You're welcome! I replied to your PM.