Is it really possible to refinance your home loan without paying closing costs? While it’s true that you might be able to dodge your out-of-pocket expenses up front, you’re going to wind up paying them over time, with no way to recoup your cash. Here are some of the pitfalls to consider that come from those no closing costs refinance offers from MortgageLoan.com:
In a zero-closing cost mortgage, lenders charge a higher interest rate to compensate for the fact they’re not collecting any closing costs. They cover your closing costs up front, but gradually get their money back through the higher interest rate – which the borrower pays. So you’re still paying for closing costs, you’re just not doing right up front.
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http://www.mortgageloan.com/understanding-no-cost-mortgages-8932
If your goal for mortgage refinancing is to take advantage of today’s low refinance mortgage rates from lenders like Amerisave, you should walk away from the table with a lower payment amount. The difference between your old and new payment is your monthly savings and how you recoup those out-of-pocket closing costs. This means you’ll get your mortgage fees back in the form of realized savings; taking a no closing cost refinance offer doesn’t allow you to recoup fees because you’re paying for them for as long as you keep the loan in the form of higher payments.
If saving money with the lowest refinance rates is your goal you’ll want to pay closing costs like the loan origination fee yourself. You can learn more about getting the lowest refinance rates without paying lender junk fees by checking out my free Underground Mortgage Videos.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
