Yesterday we received a memo from one of the big 3 banks notifying us of an increase to extension fees on all conforming mortgages on locks effective August 9, 2012 by 0.125%. An extension fee is an additional cost associated with extending the rate lock period of your mortgage loan. For example, if your loan is locked for 30 days, and it takes more than 30 days to close the loan, there will more than likely be a fee to extend the rate lock commitment long enough to close the transaction. Just like a rate lock, the longer the time period that is needed, the higher the cost is. It is typically more cost effective to have a longer lock period than to pay for an extension.
Each lender we work with has their own rate lock and extension policies. Here is what it cost to extend with this lender:
It’s important to note that this is NOT Mortgage Master Service Corporations general extension fees. We work with several lenders and what ever their fees are to extend are passed on to the transaction. One lender that we work with currently offers extensions on a daily basis (instead of blocks of time) so at a cost of 0.025% per day. If we only need 5 days for an extension, the cost would be 0.125%.
Everyone likes to keep cost down and avoid extension fees. This is why it’s critical to provide your mortgage professional with requested documentation promptly, especially once your loan is locked.