With an unpredictable market, no closing cost refinancing seems like a grand way to get rid of various fees related to securing a new home mortgage. Obtaining a home loan can be expensive. Applicants may find that refinancing too is no different and that the charges are the same for both.
The closing cost of a mortgage includes payment to the attorney, underwriter, title insurance company, the application fee, and the rate-lock fee. A “no closing cost” refinance, although one of the best ways to save money on your monthly payments, is not a very well-known method used in refinancing.
These can also be offered while refinancing your previous mortgage. Although it sounds like an awesome deal, remember that nothing in life is free, especially from mortgage lenders.
Benefits of Waiving Closing Cost
If you have planned to repay your loan in a very short period of time, then having no closing costs can prove beneficial for you. The shorter time will lower the interest rates insignificantly. Good mortgage lending companies offer options to choose high interest rates with no closing cost or a closing cost with lower interest rates.
Problems with Waiving Closing Cost
The only fee that is waived from the closing cost is the lender’s fee. Title fees, insurance fees, and other relevant costs remain the same. This is a gimmick of the mortgage lenders to use the phrase ‘no closing cost’ to attract customers in a new loan or refinancing the existing one. The new interest rate is then charged higher by the lenders and also for a longer period of time.
Mortgage lenders who drastically cut closing costs or waive their fees are often noticed to charge higher interest rates on newly issued mortgages. It is also found that the lender offers the buyer the option of changing the closing costs into a credit by adding the cost to the existing mortgage. They then charge the interest rate for that mortgage more than the closing costs.
Borrowers are also unaware of the fact that paying no closing costs does not mean that they need not pay all charges at closing. There are certain third party charges like per diem, interest from the day of closing to the first day of the coming month, interest on the previous mortgage that was refinanced from the beginning of the month till the closing and other recurring costs.
Astonishingly enough, all open fees for no closing cost refinancing are negotiable. When shopping for your refinancing, request a written estimate of all fees before signing with one agent. Compare different sources. Get recommendations and check for complaints.
When possible, use a lender who is reliable and trustworthy. Each lender is unique and has different fees and policies. You need to weigh all options available from the lender you have chosen. Remember in the current economy, there have been a number of changes in the housing and finance market. Customers should talk with brokers or mortgage lenders directly to see what options may be available.