Refinancing: Am I Being Ripped Off?

Question

Hi All,

Just got my loan package back from a lender and the fees for this refinance seem very high.  Can anyone provide some context on whether all this stuff is reasonable?My credit score: 760

Subject property: SFH in the KCMO area, 105k appraised value, doing a no-cash-out refi, plan to hold long-term.  I have an existing interest-only private mortgage for 81.5k at 8%...that's what this refi is for.

Conventional loan, 30 year, investment property.  6.00% interest rate, 5.50% with $815 fee for discount points.  This seems pretty high even with the recent increases.  Roughly 79% LTV.

Can someone look at the fees (see attached images) and tell me whether I'm paying way over what I should?  It's a low loan amount and maybe a bit complex, so not every lender is willing to do it...but I feel like I might be getting ripped off.

Any insight is much appreciated.  Thanks all!

Stephanie P. · Answer

Yes, they're high.

Many places charge one underwriting fee of about $995 instead of breaking it down with a processing fee and then an underwriting fee (on the commercial side, our fees go even higher).  Unless there was a disaster and they had to do an inspection to see if your condo wasn't flooded or an earthquake didn't damage it, there's no need for a $175 disaster fee.  I've never seen an "operating income/rent schedule" fee.  You're paying both a $150 application fee that's not necessary and a $815 origination fee.   The condo fee is actually pretty normal if they're using an outside firm for condo doc management.

Settlement fees seem in order

Unless you knew you were paying those charges up front, I would find another lender.

Hope that helps

Stephanie

Dave Skow · Answer

terms seem high for a 80% ltv  SFR rate/ term refinance of a rental property   ( 6% rate  with a 1% fee  + closing costs )  ....you might call contact a few other local  lenders for some quotes

questions to  ask lender ....why a condo  fee ?   processing and  UW  fee ?

is the  private mortgage   formally  recorded  ?   if it isn't - then the loan is  considered a cash out  refinance ..its  its a recorded  lien that then  its  likely classified as a rate/ term refinance

Matt R. · Answer

There is a principle: "Never attribute to malice that which can be attributed to stupidity".

Having said that... I wonder how often this lender shows that fee schedule to a client and the client just says "okay" and writes a check.  If that happens often enough, they can afford to discount the fees a little if somebody balks, and still make money.

Good luck!

Steve Vaughan · Answer

Rip off fees are the 4th R of the BRRRR strategy.  Its just not talked about.

Actually there is also an S after the 3rd R for Seasoning.

Properly spelled out with full disclosure is the term BRRSRORR

Buy, rehab, rent, season, refi, rip-off, recover, repeat.  Cheers!

Jay Hinrichs · Answer

these small balance loans lenders need to bring in about 4k per file or close any way they can do it points or junk fee's other wise why do it.. I know i would not.

this is why small balance loans are tough to find lenders for.. cant make enough money to pay staff rent and make any kind of profit.

Brian Bistolfo · Answer

Thanks @Dave Skow @Stephanie Potter @Matt R.! Turns out this wasn't the final document and some of these fees will be revised, but I'm going to need all of this info to know what I'm talking about. Definitely needed the context, super helpful. I'll definitely be asking my lender up front before my next deal..."OK, what do you think my total would be including every possible fee" before moving forward with them. Did that on previous deals and forgot this time with the new lender. Hopefully it's not a costly mistake this time around.

Matt R. · Answer

I can't really speak to the "big" stuff, but here's my take on some of the "little" fees.  I am not a real estate agent or title person or anything like that... I've just bought houses in Jackson County before.

1) Cozy will pull the credit report of a prospective tenant for me for $25, so $69 for a credit report seems kind of high.  Okay, $47 isn't much when you're staring down the barrel of $80,000+... but every little bit helps.

2) Why are there two recording fees?  Maybe one for paying off the existing mortgage and then one for starting up the new one... but $164 still seems high.  FWIW, the cost to record a two-page warranty deed with Jackson County, MO was $24, two years ago.  The cost to record a one-page document for a different property was $21 in 2012, so I have a sneaking suspicion that it's $21 for the first page and $3 for each extra page.  (164-21)/3 is 47, which is a loooong document.

3) If it's not a condo, maybe don't pay anything that says "condo" next to it.  : )

I hope this helps!

Dave Skow · Answer

hope it got a lot better ..all the best

Grant Rothenburger · Answer

How much did it change?

Refinancing: Am I Being Ripped Off?

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