looking for no cost mortgage refi. Do they exist?

Answer 1

yes but you will have a higher interest rate.

Answer 2

No cost simply means no money out of pocket for the homeowner.

It's just a fancy way of making the loan terms look better than they actually are. Many homeowners will choose no cost loans because they don't have the money, or they simply don't want to spend the money on the transaction.

Look at both your options. Buying down the interest rate by paying some fees upfront versus a no cost loan which rolls the fees associated into new loan.

Downside to no-cost is a higher interest rate, and a larger loan balance as the fees will likely be compounded on top of the current loan balance.

Learn more about mortgage, credit, and personal finance:

http://www.thetruthaboutmortgage.com

Answer 3

Yes, they exist. Sort of.

There really is no such thing as a "no-cost" refi. There are appraisal, title, tax and recording costs that will always exist when doing a refinance. And there's really no question as to who pays the costs. It's always going to be you. The only question is how you will pay them.

In general, they must always be a 30 year fixed rate loan. ARMs that pay enough to the lender to pay your costs are hard to find, and in today's market would likely be a higher rate anyway.

As of today, for example, you could probably get a 30 year fixed rate of 5.625%, if you paid your closing costs directly. Typically this is done by borrowing enough of your equity to cover the costs.

Let's say you owe $244,000 right now. You could borrow $250,000 and pay all your closing costs with your equity, and get that 5.625% rate. We'll just assume costs are a flat $6K, which is roughly ballpark accurate, depending on state you are in.

You may also be able to finance $244,000 at 6.25% and get your lender to pay your closing costs through the premium they receive for delivering a higher rate.

That extra half-point in rate will certainly be more expensive over the full 30 years. Problem is, 90% of loans don't last more than 5-7 years.

In this case, the $250,000 at 5.625% will have a payment of $1439. The $244,000 at 6.25% would be $1502. It's only a difference of $63 per month. If the costs were $6000, it would take you 95 months to break even, almost 8 years. So in this example, the "no cost" refi is the cheaper option if you expect you will refinance or sell inside of 8 years.

If you owe less than $200,000, it may be hard to find someone who is able to absorb all your closing costs with their rate premium. Depending on which state you are in, (some states have very high costs compared to others), it may not really be available anyways.

Call 3-5 mortgage brokers and bankers and get some quotes. Get good-faith estimates from all of them, on the same day, for the same product. It's the only way to compare apples to apples.

I haven't included APR's for any rates quoted in here, so this doesn't meet any federal guidelines for an interest rate offer. This is for informative purposes only.

Answer 4

Yes and no! There are cost involved in just doing business. There is no company that works for free! If you want a no cost mortgage then your rate will be much higher than you expect. I recommend that you pay the cost or have them financed into your note so you get as close to par as possible. Points are tax deductible over time as they are a pre-payment of interest as well as some of the other cost. But to answer your question yes it can be done.
I am a mortgage banker in Tennessee

Answer 5

No such thing as a free lunch my friend. Despite all the advertising you may hear about it, the costs of processing, underwriting and originating your loan will be paid by the borrower. No mater what. Whichever lending institution you decide to use is not in business as a non profit. They are in the business of making money. That being said, either you will have the costs rolled into your mortgage or you will have the costs rolled into your rate. One or the other or maybe a combination of both.