By No Cost Refinancing
“No Cost” means the mortgage company will pay for all closing costs and will not charge any points. “No Cost” does not mean rolling closing costs into the mortgage.
It’s true that obtaining a lower interest rate is usually the main reason for homeowners to refinance. Some are even willing to pay more money upfront so they can receive the lowest rate possible. But sometimes homeowners will not live in the house long enough to fully recuperate the costs. So, as a general rule, if you are planning to move in three years or less after you refinance, then our “Rate/Term Refinancing” is probably not the most economical way to save on your monthly payments.
There are some solutions that will make refinancing beneficial for just about any homeowner. Eligible loan types for these programs include Fixed Rate Mortgages and Adjustable Rate Mortgages. With these programs, you will not have to pay points, and the mortgage company will pay all your closing costs such as: title fees, appraisal fees, insurance fees, etc. This way, you can lower your monthly payment by obtaining a lower interest rate without having to spend a penny of your own money. In addition, you will be able to start saving instantly regardless of whether you’ll be living in your current house for just one more year or 20 more years.
The “No Cost Financing” program simply lets you replace your existing mortgage loan with one that has a lower interest rate, and your new loan amount would be the remaining balance on your current loan. Usually, the main purpose of this is to lower your monthly, mortgage payments. How do you know if “No Cost Refinancing” is right for you? Well, as a general rule of thumb, you should refinance if you can obtain a rate that is about 2% lower than your current rate. However, with no closing costs, you will see noticeable savings on your monthly payments even with a 0.5% drop in your interest rate. Also, you may want to consider refinancing if you want to build up equity more quickly by converting to a loan with a shorter term.
Reasons why you should consider a “no cost” refinance:
- Lower your monthly payment by reducing your interest rate.
- Pay off your mortgage early by reducing your term.
- Reduce interest rate risk by converting from an adjustable rate to a fixed rate loan.
- Keep your options open for future interest rate fluctuations.
Who would benefit the most, by choosing the no points, no closing cost refinance option?
- All homeowners with a fixed term mortgage who have a rate of at least a 0.5% above the current market rate.
- All homeowners with an adjustable rate mortgage who want the security of a fixed rate or a medium term ARM rate.
- All homeowners with a fixed term mortgage who wish to switch to a different term.