In today’s unpredictable market, mortgage refinance no closing costs seems lie a grand way to get escape from different fees related to securing a new home mortgage. The closing cost of a mortgage refinance includes payments to the underwriter, application fee, payment to attorney, the rate lock fee etc. A no closing cost refinance is one of the best ways to save money on monthly payments is not a very well known method in the market of refinancing. These also can be offered while refinancing done on previous mortgage. Though it sounds like the best deal ever, note it nothing in life is free, especially when it is from mortgage lenders.
Benefits of Waiving Closing Cost while refinancing
When I am planning to repay my loan within a short period, then having no closing costs can prove beneficial to me. The shorter time will lower the rate of interest insignificantly. Good mortgage lenders offer several options to choose high rate of interest with no closing cost or closing cost with low rate of interest.
Problems with Waiving Closing Cost while refinancing
Among different types of fees only lender’s fee can be waived from the closing cost. Other fees like title fees, insurance fees and other costs remain the same. It is a process to attract the customers in a new loan or to refinancing on the existing loan. If no closing cost is applied, the rate of interest charged higher by the lenders and it continues for a longer period of time.
So before refinancing my existing loan I always go through the calculations on rate of interests provided by different lenders. If I find that any of the company giving me the rate of interest at a low rate rather than giving me no closing cost, I think, it will be a better deal to go for the lower interest rate rather than attracting with mortgage refinance no closing cost.
While going or Mortgage Refinance no closing costs, it should be clear what type of costs are included in closing costs which will be waived at the time of refinance.
With a mortgage refinance with no closing costs a borrower can avoid adding fees on his existing mortgage balance taking a higher interest rate, so the mortgage originator can cover up all the costs non-recurring at closing on the mortgage amount.
Rate of Title Company and trust
Title insurance protects both the lender and the borrower ensuring a clear chain of title, allowing the people with the legal rights to convey title to their properties whatever they actually do. There ar also some policies which protect against occurrence of fraud and forgery. Refinancing creates the need for a new policy for the new mortgages. Most title companies offer different substantial reductions in the price of both the insurance policy rates as a trust of those who are refinancing.
Basically the rate of trust is a service fee charged by the title company to act as an independent third party facilitates the transaction which ensures that all parties to the transaction performing as contractually agreed. Other title fees include the fee to notarize the loan documents, registration fee etc.
Rate of lender
Mainly the lender charges a minimum rate to proceed and fund the mortgage refinance no closing costs loan fall under variety of names and can generally are grouped into a category which the industry calls as junk fees. It includes subscription, administrative expenses, document preparation, financing rates and processing fees etc.
The points mainly fall into two categories. One is discount rates and other is fees for the loan. Discounted fees are prepaid interest which a loan applicant pays in advance to reduce the rate of interest on loan. The loan origination fee is also used to minimize the rate of interest and also used to compensate the loan originator in the transaction rather than accepting a higher rate of interest where the lender that funds the loan compensates the originator of the loan.
It is also paid for appraisal purposes of the borrower. Basically this has given to some third party who are doing appraisal for the borrower on behalf of the lender of the loan.
While taking a mortgage loan from any financial institution, it is important to have an insurance of the mortgaged property. Mainly the financial institutions add the insurance premium amount with the loan amount sanctioned as mortgage refinance no closing costs so that the borrower has not to pay the same separately.
Above all fees can be waived from the borrowers to pay; whereas all these will be included in loan amount and the borrower have to pay the same with monthly installments of the loan.
I was shocked when I found that I had large number of bills to be paid of my car insurance, health insurance and life insurance and I did not had enough money to pay off the debt. I also wanted to take a refinance mortgage bot the thing was that I did not had enough money to pat the closing costs of the refinanced mortgage. Then I went to a loan office and an advertisement there helped me heave a sigh of relief.
If you are wondering what the advertisement was that gave me relief then do not. With was an advertisement of mortgage refinance no closing costs. Getting such a scheme is very rare and they have very strict qualifying terms too to let anybody avail them. You may also have come across such terms in different advertisement. Hereby I would try to explain the terms.
What is Refinance?
Refinance or mortgage refinance is an arrangement of mortgage wherein one borrower can take another mortgage over the current mortgage to pay off the debts of the previous mortgage and also gets some fund in their hand. When someone finds them in any financial odd situation they can get such mortgage loans. The application procedure is quite simple and after one gets it approved all mortgages are paid by the lender. Yes, the lender sometimes takes collateral security for the payment. Then the borrower pays it back in monthly instalment as they had been doing in case of mortgage loan. The mortgage rates for such arrangement may be higher or lesser than the previous loan depending upon different things.
How Does Closing Cost-Free Refinance Work?
It may be easy to borrow a refinanced loan, but what is difficult here is paying the different costs which are collectively known as ‘closing costs’. These costs are nothing but the various processing charges paid for different aspects of the loan process. They include stamp duty, inspection fees, auditor fees, appraisal fees, attorney charges and many more. Even the local authorities also charge the borrower a fee as the property is presumed to be transferred to the lender.
Now, as the name suggests, mortgage refinance with no closing cost is a system, when the borrower do not pay anything for bearing this closing costs while taking the refinance. It is initially bearded by the lender and later on they recover it either by increased mortgage rates or by adding this cost to the principal.
Factors that would be considered
Different factors that would be considered for this type of mortgage are
- Good job security
- Excellent credit history
- Proper home insurance
- Educational Merit
- Projection of the property to be financed
Now, when I approached the company to avail this scheme, I had to be sure that everything was right. The agreement between me and my lender should be precise and correct. I must have proper knowledge about the instalment terms and schedule. I needed to make sure that the payments were made on time as late payment may decrease my credit ratings. Thus, with all these I availed the finance and came out of the financial crisis I was facing.
If anybody is not planning to stay at the same home for a very long time, then mortgage refinance no closing costs is a great deal. It means if the tenure of the loan is very short then this deal will help to save money rather than giving them to interest on loan.
How to Apply
No closing cost refinance can be applied to banks or other mortgage loan provider companies. It is very difficult to get approved for refinance loans without closing costs. The rate of interest should be little higher in case of no closing cost refinances. It basically includes all the related fees within the loan amount, hence the borrower have not to pay the fees separately.
Terms and Conditions
Before taking such mortgage refinance no closing cost loans it is important to evaluate the loan agreement paper very carefully. I always find for other costs beside closing costs which may make the refinancing loan less attractive. “No closing cost” does not mean that there are no appraisal fees, settlement fees or other additional costs, the fees will be charged separately beside closing costs of the loan. There are several terms and conditions should be mentioned in the agreement paper where all the fees except closing costs are described with their rates. A no closing cost refinance always charged at a higher rate of interest. I always calculate the excess rate of interest I have to give the lender will be lower than the estimated closing costs or not. If found higher, then I always go for normal refinancing rather than mortgage refinance no closing costs.
So before going to opt for such loans with no closing costs, it should be clear to the borrower that he has not to pay more amount as rate of interest than ordinary loan. If he can do some research on this, it is sure he can gain some profit and can save some money by going through these no costs refinancing.