Feedback on Potential Cash Out Refi

8 Replies

Hello!

I am in process of looking into a cash out refi of my primary. I am sharing the closing cost estimates for feedback on this offering? Is $12k in total closing costs high? The basic breakdown I see is $5,084 in lender costs + $6,979 in other costs. Is the $6,979 in taxes + escrow high? Any feedback anyone has on this offering or things I should consider adjusting are greatly appreciated! Thank you!!


I had some sticker shock, too, when I first read your post.  That's right at 4% of the value, which seems high.  Digging in a bit deeper the only extraneous fees I see are:

  • Lender fee/points = $1,419
  • Settlement statment = $600 (this is usually 150-250 in my market, so it's possibl 600 is a locally normal rate, but dang)

The taxes and insurance are controlled by dat gov'ment and you, respectively.  They're simply going into an escrow account and any "too big" balance will be refunded to you each year when they rebalance your escrow funds.  For this reason I'd simply make sure you have the right insurance policy and then roll with it.

The points charged are probably the lender trying to "buy down" your rate to get it as low as possible.  

$300k loan amount and the lenders fees are $5k? This is only about 1.5%. Most banks are 1% for origination alone, not counting the rest of the fees.

What makes it seem high is the additional $7k. Lenders are different from each other. Some require 3-6 months escrow for taxes and insurance and some require 12 months. I've had deals where property taxes were $5,500 on a $300k property and they needed to do 12 months escrow + $1,500 for insurance. In total, $7k in escrow + 2.5% lender fees. In total, closing costs was $14,500. However, I'm comparing commercial to conventional.

The members above stated this is high for banks, so take their word for it. It seems low to me because I'm used to a different sector.

@Patrick Harker , what's your middle FICO score if you don't mind me asking?

I just quoted someone a 2.875% on an 80% loan to value, cash-out refinance, no points in Florida.. 3.625% seems very high. Your bank doesn't seem too competitive. Feel free to reach out if you have any questions and I will gladly answer them for you. 

@Patrick Harker , as @Timothy Hero mentioned above, with him being an actual lender and knowing what he's talking about, all of those cost are standard to getting a loan. You paid those same exact costs, if not more, when acquiring your property.

Section A is what the lender charges you, which is pretty standard across the nation. 

Section B is standard, those costs are associated with getting any loan and do not change much from lender to lender. 

Section C, you have full control of, which honestly, you're getting a good deal for whoever that attorney title company is. 

Section E is the cost that the State of Florida charges you, can't get away from that one. 

Section G is there for the sole fact that you have to setup a new escrow account. With that being said, you will receive a refund for the funds currently being in escrow with the lender that you're with now.

The only factor here that seems flexible that you may want to shop around for, is your interest rate that you're being quoted. I hope this helps. 

Feel free to reach out if you have any questions, I am one county away from you. 

Section G

The homeowner insurance is listed as $424 per month and it looks like in this case pre-paying 5 months worth in this paperwork. Is your policy actually $5k + per year?! Or did they spread the annual cost across 5 payments?

Property taxes are listed as $433 per month with 6 months being pre-paid. The 6 months of prepaid property tax is probably driving the total number up a little, my most recent refi's only prepaid 2 months worth. Either way it'll get paid at some point and is not a controllable cost, but will increase your closing costs as it bundles more of the cost up front

That rate seems high for a primary residence refi. Seeing mainly mid to high 2%'s now for a primary. For example your P&I in this example borrowing 300k @ 3.625% is $1368. The p&i on the same 300k but at for example 2.875% is $1244. You might want to get some other rate quotes

I'd be focusing more on the rate than the closing costs which are more or less fixed (you might be able to shop the lender title ins policy and save a few hundred but is it worth slowing down the refi to save a few bucks or lock in what's there now and pocket the $77k cashout?)