Can I Avoid High Refinancing Fees?

Dear Ali;
Since mortgage rates are so low and our budget is so tight, we want to refinance. Can we avoid the high fees our friends are getting slapped with?
A: Probably not.

The mortgage pipeline is flooded with refinance applications: earlier this month, almost four out of every five mortgage applications was a refi, according to the Mortgage Bankers Association.

On those refis, Fannie Mae is implementing "loan adjustment fees" that are "risk-based pricing," which means they're throwing in extra fees if your loan is in a class with a slightly higher than perfect default rate. This is aggregate statistical profiling that has nothing to do with you as an individual: it's the mortgage equivalent of paying more for car insurance if you're under 25, even though you may have never had a traffic accident.

The fees can be daunting: they were implemented at 1 percent if you're buying a two-family home and 1.5 percent if you have a FICO credit score of 699, according to mortgage guru Ken Harney.

Even as of this month, mortgage bankers are lamenting that the fees are still in place. For example, Rick Baeten of Vision Mortgage noted in the Green Bay (Wisc.) Press Gazette that someone with a credit score of 680 and a $200,000 loan would pay an extra $3,000 at closing, in addition to regular closing costs.

That's pretty daunting, and I know few people whose loans are as small as $200,000.

So roughly, don't refinance unless you are going to stay in your place for another five years -- long enough to amortize (or spread out over time) some of those ridiculously high fees.