Here is some common information on the
infamous, "NO COST REFI." A refi is a general term used
in place of the word refinance. The no cost refi may
seem up front like it is truly no cost, however, this
can not be farther from the truth. You will rarely ever
get something for nothing. Especially, in the mortgage
and real estate market. So why do you always see and
hear a no cost refi, or a no cost refinance advertised
by lenders like Countrywide and other various large and
small lenders? They advertise this because consumers
want to believe that they can really obtain a mortgage
without paying for all of the fees and costs associated
with buying a home or doing a refi. Read the information
below to find out more about a no cost refi.
If you are a home owner and are considering refinancing you current mortgage you have many different loan programs to select from. One program that has been gaining popularity recently is the no cost refi. The no cost refi program has no closing costs, all the closing costs and third party fees are paid by the lender. A no cost refi has many advantages and disadvantages associated with it.
Most of the large corporate lenders advertise the "No Cost Refi" in a way that appears to save the borrower money. The fact is that over the life of the mortgage the higher interest rate of a No Cost Refi will cost you substantially more money. You are better off paying closing costs out of pocket or rolling them into the loan in return for a lower mortgage interest rate.
Whether a no-cost refi is the way to go depends on a couple of factors. ... If you're planning on moving fairly soon, the no-cost refi might well make sense.
When you hear the term "NO Cost Refi" or "No upfront fees", ask yourself how are they going to make their money. The answer is in the form of a higher interest rate. You may save a few thousand dollars upfront but you will be paying tens of thousands of dollars in the long run. These loans are great for borrowers without the ability to pay the upfront fees but borrowers who can afford them should be
leery about using them.
One way to find out which method is best for you is to find your breakeven point. The breakeven point is the number of months it would take to recoup your closing costs based on your savings in monthly payment. For example if you incur 5,000 in closing costs which result in a $250/month savings, it would take 20 months to break even of the closing costs.
Typically, a no cost refi comes with a higher interest rate.
One of the main factors in determining whether a no cost refi is the "right" way to go is to look into your financial situation and see what your future goals are. A no cost refi is a good idea if you are considering moving in a few years or you know that you will need to refinance in a few years. The reason being is that by obtaining a no cost refi you are going to pay a higher interest rate than you would have by just simply paying for the closing costs or rolling them into your loan. Most of the time the closing costs could have been paid for within a couple of years with a lower rate loan and therefore if you keep the no cost loan more than a couple of years you will be stuck with that higher interest rate for the life of the loan or long after you would have paid for those closing costs. This will cause you to pay much more in interest over the life of the loan. After discussing your goals and needs with your mortgage professional he or she should be able to provide you with their opinion on which type of refinance will be best for you, "no cost" or "with cost".
If you have any questions regarding our products, you can contact
us by calling or e-mailing us and we'll get back to you
as soon as possible. Thanks!
Information listed above is to be used for educational purposes only and is not guaranteed