Most people look for no cost mortgage refinancing when interest rates are sliding and they want to take advantage of a lower rate without paying any up-front costs. Although new home purchasers can also find no or low-cost mortgages, they’re for more common in the refinance market.

Unfortunately, a no cost mortgage isn’t really cheaper over the long term. Instead of paying fees out-of-pocket, closing costs, or other costs at the time of the loan, the interest rate is .25 to .5 percent higher to cover the lender’s costs and any third-party fees the lenders promises you aren’t paying. The lender isn’t giving anything away for free.

refinance mortgage tip

No cost mortgages come in three flavors:

  • No points, but you pay lender fees and third-party fees
  • Zero lender fees, but you pay third-party fees
  • No cash up-front, but all the fees and costs are bundled into the loan’s interest rate.

A true no-cost mortgage would have the same interest rate as other loans and no payments to the lender or third parties. Understandably, these loans are nearly impossible to find.

Is No Cost Mortgage Refinancing Right for Me?

This type of mortgage is best for people who plan to sell or refinance in a few years. If interest rates are steadily falling, then you can move from no cost refinance to no cost refinance without spending a dime on closing costs. If you want to stay in your home and never refinance again, then the higher interest rate will cost you more over the life of the loan.

For people who plan to stay in their homes for more than five years and don’t plan to refinance again, the best bet is to save up the money to cover the closing costs and fees on your mortgage and get a lower interest rate. It doesn’t seem like a lot, but the difference between 6.25% and 6.5% can really add up. On a $100,000 loan paid over 30 years, that totals $6,000 more in interest.

If you don’t plan to sell or refinance in three-to-five years and your closing costs are less than the additional interest, more than likely they will be, then it’s worth it to pay the closing costs up front. Even factoring in your tax deduction, paying the closing costs would still save you money over the long-term. The higher your mortgage balance, the more that extra quarter point will cost you.

Where Can I Get a No-Cost Mortgage?

You can find these types of mortgages at most lenders. Bills.com can connect you to several no cost mortgage lenders. You can also find them at most of the major banks and mortgage lenders. To avoid being overcharged for your mortgage, compare their interest rates and then research each potential mortgage lender’s reviews and customer comments on consumer websites and at the Better Business Bureau’s website.

No cost mortgage refinancing is a popular way to take advantage of falling interest rates. Just be sure to refinance to a lower rate and pay the closing costs before that additional interest really starts to add up.

How Much Will I Save Refinancing?

Now that you have the opportunity to refinance at lower rates, how much will you really save? That question cannot be answered without analysis of your current mortgage loan.

Low Mortgage Rates a Mirage as Fees Climb

Robert Satnick, a mortgage broker in California’s San Fernando Valley, said he has a customer whose efforts to refinance a loan at a lower rate might cost her about $600 a month more because the value of her condominium has declined.

Mortgage refinance offer raises red flags

Q: I got a letter from Union Capital Mortgage of Ohio offering to refinance my mortgage. They even say they can refinance my loan if I owe more than I originally borrowed. Is this legit?

Lowest Refinance and Mortgage Rate Comparison

After perusing the web for the best mortgage refinance deal out there, it’s evident that the rates, points and fees required by different lending outfits are all over the map.

Rates Are Low, But What about Mortgage Fees?

Those attempting a refinance can also expect to pay an appraisal fee-maybe $300 or so-up front, Hebron said. Mortgage rate lock fees are also becoming more common, though it’s not impossible to find a firm that will not charge for that [...]

Mortgage Rates Are Low, But It May Still Cost You

When you factor in all the costs associated with closing on a new mortgage or even a refinance, you can often expect to pay at least 3% of the loan amount in fees. This is especially important when you’re thinking about a refinance as the costs may outweigh the [...]

Is a Mortgage Modification right for You?

No matter where they start, homeowners seeking mortgage modifications are at the mercy of lenders. The workouts are often voluntary and, completed on a case-by-case basis, they frequently come without standardized procedures.

Author: Justin Narin

For more articles and suggestions, visit http://www.bills.com/home-refinance/

Justin has 5 years of experience as a financial adviser; his key areas are loan consolidation, debt relief, mortgages etc. For more free articles and advice visit http://www.Bills.com

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