Cash out Refi - Loan Fees and Costs, What is reasonable?

5 Replies

What amount of fees are expected these days in a cash out refi? How much is reasonable when it comes to loan fees? I had planned to do a cash refi on one of my investment properties, but the fees are too high. With the appraisal paid for and done; at 75% LTV, I am only gonna be getting around $68k in cash but the estimated closing cost is $5,522. (Includes $4,720 in loan cost and other fees). This figure does not include another $1757 for Homeowners insurance and taxes which is a given. Is this reasonable?? Any inputs is very much welcomed! TIA

@Ikenna Okafor I don't know your total loan amount but these seem like pretty reasonable fees for a cash out mortgage here in Texas (there might be some improvement possible depending on the loan amount).  A cash out mortgage will require title insurance (probably the largest fee you pay) and attorney fees, doc prep, etc. etc. etc.  A cash out mortgage will be a 30 year fixed rate....again, depending on your loan amount your rate will be in the 5's.  

There is an alternative product which will be hard to find in Texas but a "Line of Credit" is an alternative.  They have lower fees but it is a very different product.  A line of credit is almost like a credit card attached to your house.  You can draw money out, use the money, then pay the line of credit back, and then reuse it again and again.  It's a great product for flippers.  Lines of Credit will carry an interest rate of about 6-7% and it will be a Variable Interest Rate. Please don't get this confused with a HELOC (which has lower rates but it only for your primary home). Since the rate is variable, you do not want to be in the product for a long time. After about 10 years the Line of Credit will "mature" into a different loan and the rate will increase even further. Again, a good product but not designed to carry a balance for a long time.

There are pros and cons to everything I guess but feel free to private message me if you have any other questions on it.  Thanks!

Thanks Andrew for the response. This property is located in Nashville TN. I haven't been able to find any Bank that will do a LOC on an investment property hence my resort to cash out refinance. Any recommendations for Investment property LOC?

Originally posted by @Ikenna Okafor :

What amount of fees are expected these days in a cash out refi? How much is reasonable when it comes to loan fees? I had planned to do a cash refi on one of my investment properties, but the fees are too high. With the appraisal paid for and done; at 75% LTV, I am only gonna be getting around $68k in cash but the estimated closing cost is $5,522. (Includes $4,720 in loan cost and other fees). This figure does not include another $1757 for Homeowners insurance and taxes which is a given. Is this reasonable?? Any inputs is very much welcomed! TIA

Would need to see the full breakdown (LE or CD) to comment on the closing costs, but FYI cash out refinances @ 75% LTV start with your choice of either a 0.625% fee, or a rate bump, and can go even higher (up to north of 3%!) if you don't have stellar credit. The below is in addition to other "hits" such as if it's an investment property, 2-4 unit, etc etc.

It turns out a bunch of people historically used cash out refinance proceeds to quit their job, become addicted to hard drugs, etc, and now the rest of us pay the price in the form of cash out refinances being priced as riskier loans. Even at less than 60% LTV, which you would think is the least-risky type of mortgage ever, that 0.375% hit is still there (though at that point it is small enough that a borrower might not notice or be aware of it).

what is the type of loan program and rate thats  tied to this present proposal ? (75% LTV... $68k in cash back ... estimated closing cost is $ $4,720 in loan cost)  ?

if you haven't already asked  the lender you are working with  if its  possible  increase the rate and  reduce the closing costs ...you might ask them this question