Borrowers beware….indirect tax will increase loan fees and interest rates soon

Do you remember that HUGE increase you got in your pay-check last year when Congress implemented the payroll-tax cut as a way to stimulate the economy?  I ask that sarcastically.

The 2% cut in payroll taxes for employees equates to about $30 per week for a household making $80,000 per year.  Well, it’s time to pay the piper.  When Congress extended the payroll tax cut through the end of February they elected to pay for it via an indirect “tax “on conventional mortgages.

It’s difficult to measure the exact impact of this “tax” but according to THIS ARTICLE borrowers who take out a new conventional mortgage will accept an additional .125% to their interest rate or pay an additional .30%-.40% of the loan amount in closing costs.  Lenders are not publicly announcing when the increases will take effect but as of today many lenders we deal with have yet to implement the increase.  Although we can’t be certain of the future direction of mortgage rates it doesn’t seem like a bad idea to lock in ahead of this change.