Monday, April 11, 2011

Tuesday, March 29, 2011

What Is a No Cost Refinance?

no cost refinance

How would you like to refinance your existing mortgage to a lower rate with small work and virtually no cost to you? Impossible? Not today. Let us show you how to successfully go about a no cost refinance.

No Cost Refinance Defined
Typically, any loan where the loaner pays all of the closing costs in a refinance deal is referred to as a "no cost refinance" (consumer terminology) or "no closing cost" (industry language) loan. By agreeing on a loan with a rate higher than the base concern rate, lenders earn a "Yield Spread Premium" which is commonly ill-used to pay off close costs as an incentive.

Basically, you agree to a slightly higher interest rate, and in turn the lender uses some of the additional money they will be making off of you to pay for the closing costs.

Caution Buyer: When shopping for a no cost refinance loan, make sure you realise which fees are covered by the lender and which fees you will still be responsible for, such as per diem interest, escrow fees, indemnity, and possible transferee taxes. Your lender may offer to pay for these types of fees as well, but they are likely to be built into the loan total and not interest rate.

Wherefore Do a No Price Refinance?
The easy answer is that you are able to refinance as often as you wish without incurring important costs each time. A no cost refinance gives you the flexibility to refinance whenever there is a better rate, without having to worry about paying additional close costs if it becomes beneficial to refinance again in short thereafter (Example: anther significant interestingness rate drop). If you think that the interest rates may fall even lower in the next few years, this is an excellent refinancing choice. If your credit, equity, and income are sufficient, you can even take this one or two steps further by refinancing each time to a ARM with an attractive teaser rate.

Why Choose a Standard Mortgage Instead?
A lower interest rate standard mortgage is a better idea if you are preparation on staying in your home for many age, and do have the funds on hand to pay up for typical close costs. Also, in a market where concern rates are not expected to drop, a standard FRM with closing costs is not a bad idea. Since the closing costs in a no cost refinance are but being built into the loan in the form of sake, paying this amount of money upfront has the potential to save you money down the road.