Is Low Cost Or No Cost Refinancing For You?

Advantages Of No Cost Refinancing

At one time or another, most home owners will look into refinancing their existing mortgage. There are many things to consider when doing this. Interest rate is obviously a major concern, but closing costs should also be considered. Weighing all of one's options when refinancing is a wise choice.

Because closing costs can be so hefty, many consumers are looking for a low cost or no cost mortgage, also know as no fee refinancing. These have been developed to accommodate a growing demand for more economical loans. No cost refinance loans are basically loans in which no closing costs are paid by the borrower. The usual costs associated with a mortgage such as a title search fee, an appraisal, application fee or closing fee are paid by the lender. This is good for those who do not have the money to pay these costs up front.

No cost or low cost mortgages generally carry a higher interest rate than a traditional loan. The higher rate compensates the lender for the fees that they have paid for you. Most of the time, the rate is between a quarter and a half of a percent higher than if you had paid the closing costs. You should keep in mind that even if you do not have the cash up front, most lenders will finance the closing costs in with your loan for you. This is fine if you have the equity in your home to do it, but if you are maxing out your loan to value, the higher rate in exchange for getting all of the money you need may be worth it. Another thing to watch for is the prepayment penalty. If you are going to stay in your home for awhile, this may not be a concern for you, but if you are thinking of moving in a few years, be sure to know what the fee is for paying the loan off early.

There are other advantages of a no cost refinance loans. Many times, these are offered by a different division of your bank. The advantage of this is that, often, you can get a higher amount of money out of your home and still not pay PMI, or Private Mortgage Insurance. Many times, these special loans don't assess points, either. This can make the higher rate worth it, as PMI can be very expensive. You should ask about special deals on checking accounts and credit cards also. Most banks offer a higher checking account with more benefits if you have your mortgage with them. These can save you money in little ways, such as monthly service fees and check ordering fees.

No cost and low cost mortgages are very prevalent these days. When looking for an affordable mortgage solution, compare all your options and calculate how much you would be saving in the long run. Make sure you read all the stipulations and negotiate for the best deal. If you do your homework, a no cost mortgage could be the right option for you.


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