February 28th, 2018 7:29 AM by Jackie A. Graves, President
The lure of refinancing right now is powerful with interest
rates hovering near historic lows. But there is a potential downside to
refinancing: The cost, as closing costs on a refinance typically run about
$4,000. The good news: You can score a no-closing cost refinance.
With a no-closing cost refinance, you won’t have to pay
thousands in upfront closing costs for
things such as appraisal, underwriting and processing fees — the mortgage
company will waive them.
Sounds great, right? Well, there’s a catch: Just because there
are no upfront costs associated with the refinance doesn’t mean it won’t cost
Sometimes, the mortgage company will charge you a higher
interest rate if you waive the closing costs. So, you might get a 3.5 percent
interest rate if you pay closing costs, but a 3.9 percent rate if you don’t.
Other times, the mortgage company will simply add all of the closing costs, tax
and insurance escrows onto your total mortgage balance, giving you a bigger
total mortgage bill.
If you plan to stay in the home long term, it is usually a good
idea to go ahead and pay the closing costs and take the lower interest rate or
lower total loan balance. The reason: Over the long term, you’re likely to pay
more in interest than you would have in closing costs.
The no-closing cost refi can make sense for some people — in
general, those who don’t plan to stay in their homes for more than five years
or who will probably refinance again soon. In this instance, the slightly
higher monthly interest payments they will pay usually won’t end up exceeding
the amount they would have paid in closing costs, assuming they sell the house
(or refinance) within about five years.
Obviously, each buyer will need to do his or her own math on
this by determining how long they want to stay in the home and what the higher
mortgage interest payments would be over that period vs. what the total closing
costs would be.
A no-closing cost refinance can also make sense for people who
need to do renovations on their home but don’t have the cash to do them. You
may get a better deal by taking the slightly higher interest rate (or adding on
to your loan balance, which would also mean you have higher interest payments
each month) on the refinance loan than you would on taking out a home
equity loan. (This, obviously, depends on interest rates for both
If you want to get a no-closing cost refinance, you can compare
options on Zillow.
Make sure to filter your quote results to only show No points and No fees
mortgage quotes. Even if you don’t see a no-closing cost option, it is worth
calling the lender to see if they will offer you one.
To view the original
article click here Apply to
Buy a Home Apply to Refinance