Savvy Shoppers Compare Refinance Fees

by Triesta B. from St. Paul, Minnesota USA

Ask Kate how to compare refinance fees: Hi Kate, Thank you for the marvelous service you are providing to mortgage shoppers everywhere! I'll be going through all my old records to see how much of my money went to banks and brokers over the years. My question regards a HARP 2 refi with my current servicer.

Triesta continues... There is a second (HELOC) on this property and the person I spoke with about a refi mentioned that there might be a subordination fee of $150 to $200 as a line item cost.

Would this be charged only if the HELOC holder doesn't want to subordinate on the new mortgage with my current primary servicer?

How would I know if there was unwillingness from the HELOC holder to subordinate? Is this a junk fee?

Also, could you please address Notary Fees of $125 to $225? Shouldn't this be part of the Settlement or Closing Fee ($350 to $500)? Are closing fees junk fees too?

By the way, the origination fee would be coming in at just under 1% on the loan.

Kate Answers: Savvy Shoppers Compare Refinance Fees

Dear Triesta,

You mention a great exercise for homeowners. If you have refinanced in the past, try this. In each refinance file, find...

1. The Good Faith Estimate.

2. The HUD-1 closing statement.

Now start comparing. Add up non-recurring refinance fees on the GFE that went to the broker, bank, and 3rd parties.

Then see how the individual fees and totals on the Good Faith Estimate compare to the HUD-1 closing statement. There should be little difference, if any at all, between charges on the two documents.

Become a Super Savvy Mortgage Shopper

Now keeping the forms handy, read my 3 articles to take your savviness to the next level.

• Categorizing Mortgage Closing Costs
• Reducing Mortgage Refinancing Costs
• Preventing Good Faith Estimate Surprises

By now you should be getting a feel for typical fees in a mortgage transaction, charges you'd never again agree to pay, and how to prevent being surprised by higher interest rates and refinance fees. In short, you've elevated your mortgage savviness!

Subordination Fees

Now to answer your specific questions. A fee is often charged by 2nd mortgage lenders to cover the administrative cost of subordinating to new 1st mortgages.

If the 2nd mortgage lender did not agree to the subordination request, you would know. Your HARP refinance would come to a screeching halt until you agreed to pay off the 2nd mortgage balance in full.

By the way, HARP refinance guidelines do not allow 2nd mortgages to be rolled into the 1st mortgage balance.

For anyone having trouble getting their 2nd mortgage holder to agree to a subordination, go to HARP Refinance Made Impossible.

Notary and Settlement Fees

Some states limit notary fees to as little as $10. So first of all, find out if Minnesota has limitations. (Try going to your .gov website for starters.)

I'm not sure what is customary for the state of Minnesota. But I assume transactions require an escrow company or attorney to handle closing. Depending on the complexity, I don't think $350 to $500 is high.

But question why they can't sign you also. In other words, if they do not offer signing services, why aren't they absorbing the notary fee as it's certainly in the scope of their duties.

But perhaps you can't come to their office to sign your final loan documents. Then paying for a traveling notary would make more sense.

Origination Charge vs Credit and Points

Understanding this part of the Good Faith Estimate can be tricky. So even though you didn't have a specific question about lender origination charges, credits, and points, let's discuss them.

The lender origination charge covers the administrative cost of originating the mortgage. Processing fees, underwriting fees, funding fees, and other miscellaneous lender fees are included in the origination charge.

There is also the possibility of a credit (rebate) or charge (points) for a specific interest rate.

In a nutshell, when borrowers chose a higher-than-market interest rate, this is disclosed on the GFE as a credit. But what if the borrower chooses a lower-than-market interest rate? In addition to the lender origination charge, the borrower pays points (aka prepaid interest).

Bottom line, origination charge minus credit, or origination charge plus points equals adjusted origination charges. Read more about comparing mortgage rates and points.

Compare Banks to Brokers to Correspondents

But you should know banks are not required to disclose a credit (rebate) or apply it to the origination charge in the same manner. So for a true apples-to-apples comparison, get Good Faith Estimates on the same day from 1) a broker, 2) a loan correspondent, and 3) a bank. Compare both monthly payments and adjusted origination charges.

One more thought, be careful about the notion that refinance fees are set in stone once they are on a Good Faith Estimate. GFEs can expire. So watch the expiration date, after which all bets may be off.

If your mortgage rate is not locked at the time of the initial Good Faith Estimate, closing costs and rate are also subject to change. Go here to read about locking in your mortgage rate.

Good luck and best wishes,

Ask Kate about Your Mortgage

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