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You can limit fees while refinancing your mortgage

Are you refinancing the refi of your earlier refi?

If the mad rush of mortgage applications this month is any guide _ three of four have been for refinancings rather than new purchases _ the answer nationwide appears to be: Yes, we are doing precisely that.

With 30-year fixed rates floating down to Korean War levels, it's hard to stay out of the market. Thirty-year money is readily available in the mid 5 percent range, 15-year loans are around 5 percent, and one-year adjustables are below 3.75 percent. How can you say no?

Even if you refinanced in the latter half of 2002, as I did, rates have dropped enough to justify doing it again. That is especially true if you can limit or eliminate the standard transaction fees that get tacked onto refis as dead weight.

You can achieve this in a couple of ways in today's market:

First, shop for a "zero cost" or limited-cost refi. Most competent loan officers and brokers can accommodate this modest request. They do so by rolling all or most of your transaction fees into the new note rate, raising it by [ or \ of a percentage point. The rolled-in fees are negotiable, but they may include appraisal, title search, title insurance, document prep, administration and legal. The deal may include transfer taxes and property insurance, depending on how you negotiate the terms.

The upside on a fixed- or limited-cost refi is obvious. You cut your rate and monthly payment immediately, at no out-of-pocket cost. You go from a 6.5 percent note rate to 6 percent at little or no expense. Sure, you could have gotten 5.75 percent, but you also would have had to pay substantial settlement fees. It might be many months before you reach break-even, the point at which your monthly payment savings exceeds your transaction costs.

The downside to zero-cost refis: You never get the lowest possible note rate, and you face the theoretical possibility of paying for closing cost items for 30 years, turning a $350 appraisal into a $1,000-plus expense.

But get real: How long did your last mortgage stay on the books? A year? Two years? Much less? (Mine had a shelf life of 180 days, even though the full term was 30 years.)

Another alternative: Contact your lender or servicer and ask for its lowest rate and lowest fixed-price settlement package. That means, at the very least, a deeply discounted "reissue rate" on the title charges and no formal appraisal. Reissue rates can knock 50 percent to 60 percent or more off your title insurance fees, and some large insurers are offering special refi-only title packages as low as $275 per loan.

If you are refinancing a loan with the same lender within less than a year and are not taking out additional cash, see if you can get the appraisal waived or replaced by an electronic AVM (automated valuation model) or an abbreviated drive-by recertification that the property has at least retained its market value. AVMs generally go for $24 to $30, drive-by recertifications or BPOs (broker price opinions) for somewhat more.

Credit? Why pay $55 when your lender knows your on-time payoff record, your income and your credit status intimately, and probably peeks at your credit file and scores without your knowledge a couple of times a year?

The point: Your lender should have compelling motivation to retain you as a customer. With zero-cost or "streamline" deals readily available elsewhere, you need to demand a low-cost, fixed-price package to keep you in the stable.

Bear in mind, however, that refi transaction costs are not totally controlled by your lender. To some degree, they depend on the state you live in. A study by online mortgage banker QuickenLoans Inc. reveals that state and local taxes, title insurance rates and other fees can more than double the cost of a refi. Quicken, which does business in all 50 states and the District of Columbia, compared transfer taxes, title fees, "doc stamps," "intangibles" fees and other state-imposed add-ons for a $150,000 refi with a 70 percent loan-to-value ratio.

The costs ranged from $3,001 in Florida, the most expensive refi state, to $1,207 for North Carolina, the least expensive. Perhaps surprisingly, some high-housing-cost, high-appreciation markets are not high-overhead refi jurisdictions. For instance, the District of Columbia, California, Massachusetts, Connecticut, Virginia and New Jersey are midrange in transaction tax add-ons for refis.

But some lower-appreciation markets, such as Oklahoma, West Virginia, Pennsylvania, New Mexico and Idaho, impose some of the highest transfer fees on refis in the country.

Is there a message here?

Ken Harney's e-mail address is