If you’re been eyeing today’s low refinance mortgage rates but have no cash for closing, you might be considering one of those no fee refinance offers. Depending what your goals are for mortgage refinancing you can lower your monthly payment or reduce your long-term finance charges. Here’s an example from HSH.com to illustrate how mortgage refinancing can be beneficial even if you don’t have the cash on hand for closing:
Question: I have $70,000 and 12.5 years remaining on a 20-year loan at 5.75 percent. My credit is great but I have no cash to pay closing costs. Should I refinance?
Closing costs represent a significant out-of-pocket expense. If you can negotiate to pay less, including the loan origination fee, you can reduce your total finance charges over time. Keep in mind that if you’re not paying your closing costs you’ll be accepting higher refinance mortgage rates. How much higher depends on how much the lender is paying for your origination fees and other closing costs. Typically your rate goes up by .25 percent for every one percent of your loan amount. (think of it like a discount point in reverse used to pay your lender fees)
Higher refinance rates means a higher mortgage payment for as long as you keep the home loan. The average homeowner refinances every four or five years; however, most no fee refinance offers come with stiff prepayment penalties which could cost you a lot of money.
You can learn more about answering the question Should I Refinance my Mortgage by checking out my free Underground Mortgage Videos.