Refinancing your mortgage can reduce your monthly payment and interest rate. But with the closing costs associated with refinancing your mortgage, is it worth it? We have heard about new “no closing cost refinance” options available.. But what are the hidden costs? Could a no cost mortgage refi cost you tens of thousands of dollars over the life of the loan? Let’s dive into the numbers to see…
The average closing costs to refinance a mortgage loan in 2018 is 1.5%. This figure will vary based on different factors such as the loan type and your credit score. On a $200,000 mortgage the average closing costs will come out to 1.5%, or $3,000. If you are refinancing into a 30 year term this means you will need to see a decrease by about $90 a month to break even. The good news is that most lenders will allow you to roll the closing costs into the loan. This way you do not have to pay any cash up-front.
How No Closing Cost Refinance Loan Work
A no closing cost refinance seems a little too good to be true. In fact, it may be…The truth is you’re going to end up paying something to refinance your mortgage. Whether it’s in the form of closing costs, original fees, or a higher rate. A no closing cost refinance will usually come with a higher interest rate to make up for the lost costs. That rate could be as much as a half a percent higher than if you were to pay closing costs. A half a percentage point over the course of a loan will cost you tens of thousands of dollars over the life of the loan making it more expensive in the long haul. Advantages of a No Closing Cost Refinance No additional lender fees Mortgage balance won’t increase Pay nothing out-of-pocket Disadvantages of a No Closing Cost Refinance Higher interest rates Is more expensive over the life of the loan Not available from all lenders Get the Best Refinance Rates When you’re refinancing your mortgage it’s critical to compare refinance offers from multiple lenders. If you are being offered a no cost refinance. It makes perfect sense to still shop around, you may find a better deal from a lender that does charge closing costs. Remember these costs can usually be rolled into the loan so you do not have to come out of pocket for them.
Types of Refinance Programs
What Makes Up Closing Costs on a Refinance Loan
Bottom Line… A no closing cost refinance may sound like a great thing. But, don’t fall for the tricky advertising. There’s always a cost to pay for a loan. Whether in the form of closing costs, or increased mortgage rates, the mortgage company will make their money.
Our entire experience with SURE Real Estate was nothing short of exceptional. Steve and his associates were professional, competent, and trustworthy. Even after we were in our new home, Steve continued to provide us with resources and contacts within the community. We would not hesitate to work with SURE again.
Karen Onofre & Brian Cote|Del Mar, CA