Average Cost of Cash Out Refianance

[Cel Arrington]

hey BP! 

I had a quick question about what my expectation should be around a cash out refi for my investment property.  A lender I've worked with in the past for primary residence is quoting me for something like 6.5k to cash out refi on a property worth ~90k, and that seems extremely high.  What should my expectation be?  What type of lender should I be talking to in order to get a better rate than that?  

Thanks!

[Sudhanshu Singha]

@Cel Arrington what is the breakdown of the 6.5K in closing costs? What I am thinking is that the lender is probably charging you a combination of high origination fees and points and enticing you with a low interest rate. Here is a sample breakdown of what fees might/should look like so you can maybe compare it to the breakdown to see what is causing the high fees. I am assuming you are pulling out 80% of the 90k property so a loan amount of 72K.

Potential Closings Costs: $2715-$6230

Origination Fee -(1%-2%) =$720-$1440

Points (.75-4 Points)= $540-$2880

Appraisal=$400-$500

Title Search=$175-$250

Title Insurance=$275-$350

Wire Fee= $25-$40

Recording Fee=$50-$70

Transfer Tax= $180-$200

Miscellaneous Fees=$350-$500

Ideally you would want to be on the lower range of the closings costs and I don't recommend you refinance with this lender unless absolutely necessary. I think they might be trying to take advantage of the Covid-19 situation since a lot of lenders are temporarily halting investment property cash out refinancing. 

I would say in your situation 3k or lower in closing costs would be reasonable for a 67-72k cash out refinance. Ideally you would not want to spend more than 1% on origination fees and also not pay more than 1 point for the best interest rate. Someone who is mortgage broker in Virginia or ideally the Roanoke area would probably be the best person for advice especially on what is a reasonable amount of origination fees and points during this Covid-19 period. 

I hope the breakdown of costs helps!