Refi Loan costs are through the roof

18 Replies

So what's the real reason refi on investment property is soooo outrageous? I'm doing a refi on my personal home, cost about $1200-$3k. Now I'm getting quotes on my 4plex and they want $11k-$14k loan costs. 

That seems odd to me. My closing costs don't change much at all from a SFR to a Quad for C/O or RT Refis...

I would ask whomever is quoting this for you and see what's up.  

@Jim Butterfield shop around, but as @Kyle Keller mentioned there was a recent change with investor loans where they are trying to limit the number. Each lender may have different caps they are worried about and may use different methods to limit. It sounds like you are paying upfront fees. Others may charge higher interest or some combination of the two. Get multiple quotes.

@Nick Belsky actually this is from multiple lenders.. 3 so far. the answer is... 



Unfortunately, that's just the nature of that kind of refinance. By being an investment home cash out it already increases your costs significantly. The fact that its also a multi-unit property also adds to the cost. The costs all have to do with how much risk the lender takes, and they charge points accordingly. Normally in a SFH primary home you can get 0 points or even lender credit. In this situation the only options are with buying points



@Kyle Keller yes i heard the number went from 13% of portfolio down to 7%. I also heard the person that made that decision got fired over it. So im willing to wait a few months and see if this changes.


hello Joe,

Yes I will keep looking. I really hit the hornets next using online refi loan search... 

The former FHFA director was fired. He made all sorts of terrible decisions like the non-owner cap. The new Acting Director Sandra Thompson will likely repeal the cap because Fannie Mae and Freddie Mac are important to rental property lending and keeping rents down. You might want to way a few weeks or months to see if the cap is repealed.

What costs in specific are you referring to? Many times the closing costs appear much higher than they actually are due to taxes and insurance being collected for escrows. If you are referring to the cost of the buydown, then yes the rates are higher/buydowns are more expensive for a cash out investment multi because it is viewed as more risk by lenders. And of course, limiting the number of investment properties in Fannie Mae's portfolio has driven the rates up as well. Is your lender charging different fees for different occupancy types on the property? Most lenders charge either a percentage based on the loan amount or a flat fee to cover processing and underwriting. 

@Jeff Shumway hello, no i know all about escrow. its not for escrow, i have tool all lenders NO tax/ins escrow. I pay my own. They dont get into the details of the loan costs initially. its a PIA to get them to supply a explained Disclosures statement. Below is what I typically get until i start there loan process. The bottom line i get from all the finance companies is, more risk due to non owner occupier. 

Rate

APR

P&I

Closing Cost ($)

Discount/Rebate($)

Discount/Rebate(%)

3.250

3.482

$1588

$12,786

$8,650

2.370

3.375

3.574

$1614

$11,264

$7,128

1.953

3.500

3.668

$1639

$9,859

$5,723

1.568

@Jim Butterfield   Keep shopping around or try smaller, local banks that will hold the loan in-house.  I just closed on a refi of a duplex investment property last week and they only charged $1000 for a documentation fee (plus the smaller fees like recording, credit check, wire fee).  Additional $500 to the appraiser and $1000 for title search and title insurance to the attorney.

Good luck!

There's so many things unanswered on your original post, we can't respond without the info.

Are you buying the rate down? Is it with a private/commercial lender? My private/commercial lenders average a closing costs of around 3%.

However, things like title, appraisal and escrow can make it look like it's way more, when in reality, those are outside fees and aren't fair to hold against the lender.

Hello Tim, I am well aware of the standard costs for a loan, but when the Origination charges ( what the loan company gets for doing the loan) are in the $5k-$9k range that is what i am refereeing to. Recording fees, transfer fees, and title ins is all standard costs in my area. those usually don't change much. At least from the 4 loan estimates I have. And NO, i have not tried to buy down any points on these estimates so they are apples to apples comparison. 

Have you received a loan estimate, or at least a closing cost worksheet? You should find your answers there. There should be little difference. Yes, a little more expensive (appraisal costs more, title fees a bit more), but other than that, should not be such a huge difference.

Jim,

Looks like the parameters for FNMA and FHLMC may be changing their requirements in the near future. Check out my go to lender's YouTube video below.

Hope this helps,

Tim