Cashout Refinance Question

8 Replies

Hey Guys,

I have a question, I own a property cash and I am looking to cash out refi, The property appraised at 335K and I am cashing out 190K , my closing costs are considerably high, 15K compared to closing costs I have endured when purchasing my home and another duplex. I also refinanced my home for a lower rate and closing costs weren't even close to 15K. Usually around 5k to 7k. Should i be switching lenders or is this typical for this type of cash out? Still fairly new to the real estate game so any thoughts and opinion are appreciated.

@Alexis Hassun check through your closing costs to see if they are escrowing for taxes and insurance. Lenders have to give a closing disclosure a certain amount of time before closing, and a lot of my clients freak out when they get that disclosure. The disclosure is overly conservative and doesn't give a clear picture of where the money is going. For instance, which of the closing costs are actually going to the lender (origination fees, etc) and which are going to bills you would have had to pay anyways (taxes, upcoming taxes, insurance).

@Alexis Hassun What rate were you quoted? The high rate could be due to market uncertainty caused by covid-19. Is the lender a bank, credit union or hard money type firm? How many points were you charged as origination cost? Answers to these questions will shed more light on why your closing cost is higher than usual. Hope this helps.

John, you hit it right on the money, they're charging taxes and insurance upfront. I dont know why , I already have insurance on the property and I don't escrow. I'm assuming this is standard , I just emailed him about it. Cant believe I missed that, I just looked at the total. 

Thanks Festus for your reply, it's a bank, I'm getting 1% on points and interest rate is 3.875%. I overlooked the initial escrow on the closing details like a dummy. I'm also paying a lock rate fee of 1,700 and underwriting fees of 995. Which does contribute to the high costs.

@Alexis Hassun Shop around. Since your LTV is lower than 80%, the lender is probably not including any escrowed items. Your refi costs are high due to the points you are paying up front. See what the cost would be without the points. Your rate will be higher, but rates are not as important as the cash flow from the rental.

@Alexis Hassun Escrows for taxes and insurance are something to be concerned about if you do not escrow but that is not a 'cost of doing the loan' and nether is the prepaid interest. Costs of the loan are underwriting, points, title costs, and recording fee. You issue is somewhere else. The rate lock fee is high but not the issue if you are paying 15k cash to close.

My brokerage for example will do 1000 for underwriting, 400 for recording and 1500 for title work. You just need a better broker/lender.