Closing cost no refinance
No closing cost refinance is an effective but not a very well-known kind of refinancing. In this loan, a borrower is not required to pay the closing cost associated with his previous loan. The borrower has to pay only a slightly higher interest rate from which a lender gets rebate and uses it to pay the closing costs of the borrower ?s original loan.When you decide on refinancing at a slightly higher rate than the base rate, the lenders are paid ?Yield Spread Premium? which they use to pay your closing cost.
The closing cost includes paying the lawyer, underwriter and title insurance. Moreover, you also do not have to pay the application fee and rate-lock fee. A no closing cost refinance is the best way to save money on monthly payments. Let us understand this with an example. Suppose that you currently are paying at 7.5% interest on a 20 year loan and are planning to refinance as the interest rates are going down. By opting for a no closing cost refinance at 7.25% interest rate, you can bring down your monthly payment considerably, and that too, without any upfront investment. In a no closing cost refinance, you as a borrower will be responsible for three things, namely, pre-paid interest, escrows and appraisal. Pre-paid interest is the interest from the date when you opted for the loan till the month-end.
This is to bring you in sync with the bank?s monthly cycle of collecting monthly payments. You also have to fund an escrow account so that the lender may pay the property tax and insurance bills of the owner of the house. You will also be liable to pay the appraisal fee to the appraiser, which is credited to you at the closing table. No closing cost refinance is different from cash refinance as in the former you do not have to pay the closing cost associated with your previous loan and you start saving money right away from the first payment you make. In a no closing cost loan, you can go in for refinancing as and when the interest rate drops. As you do not have to pay the closing cost, the savings in payment are immediate. You can continue refinancing every few years to gain benefits. For no closing cost loans, you can approach banks such as Bank of America, Bank of Texas or any other leading bank in your state where you can get refinance. You can also get refinance from private companies such as Choice Refinance, Amerisave or online mortgage companies like e-loan which may effectively cater to your needs.
These banks and companies offer refinance at a competitive and attractive rate of interest (somewhere between 6.5 to 7.5%).Now the question arises as to whether these offers of no closing cost loans are truly no cost ? Are there really any ?free lunches? in no closing cost refinancing? You must remember that no one works for free and every bank and refinance company is working to derive as much profit as they can from their clients. These companies do not waive off their fees, what they do is just adjust them by inflating the interest rate. So, you should look for a company or a bank that can offer you the best deal so that no closing cost refinancing can prove to be profitable option for you.When you are out to shop for a no closing cost refinance, you may find many banks and refinance companies bragging about their offers. You should take proper care that you do not end up overpaying while refinancing your loan. Do not make decision solely on the basis of the advertisements which often make big promises. These offers are just gimmicks to lure the prospective borrowers.You should watch out for the inflated interest rates as these may lead you to pay more than you would have paid in simple cash refinancing (by paying closing cost). An inflated interest rate may make a big hole in your pocket over the years making you shell out a couple of thousand dollars more. These deceptive marketing tactics are followed by many banks, mortgage companies and brokers in the United States.
Another question that is frequently asked is if you can tell a no cost refinance from the APR? If the APR is higher than the interest rate it means that you may be paying some of the lender fee and do not have a no cost refinance. Even if the APR is equal to the interest rate, you can not be sure that you are getting a no cost loan as all the closing costs are not included in the APR.No closing cost refinance can be the best option for you if you are planning to sell your house in a few years and you have a mortgage with a higher interest rate available on a no closing cost refinancing. When the interest rates take a dip, the no closing cost loan also goes well with those who opt for refinance every time the market drops. By successive refinancing you can keep the life of your mortgage short. No closing cost refinancing is easy to find and is helpful in saving a considerable amount of money which you can use to meet your outstanding expenses.
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