With mortgage rates at record lows across the country a lot of homeowners are looking into a no cost mortgage refinance to take advantage of these rates, without having to pay a lot upfront to do so. These no cost or low cost closing deals can be found elsewhere too but are most common in the refinancing industry. However, most of the time a no cost closing actually ends up costing much more over time. Usually instead of paying the closing costs and fees yourself upfront, the interest rate is generally increased by as much as 1% in some cases for the lender to make profit for the “No Cost” closing. This really is not getting anything for free at all, and in fact is a waste of money. A true no cost mortgage closing is almost impossible to find which has the same rates and conditions as regular cost involved mortgage refinance options. Typically there are 3 types of no cost mortgages, which are:

No points but you are responsible to pay lender and any third party fees.
No lender fees but you must pay any third party fees.
Most common, no cash needed upfront but fees and costs are added into the mortgage interest rate.

There are a lot of fly by night mortgage lenders hoping to feed off the refinance rush with these low or no cost closing offers. They are hoping to get some uneducated customers who will take their word for everything. The best thing you can do is to shop around different lenders and compare costs versus savings and ask a lot of questions. Closing costs vary a lot between different lending companies and so do terms and conditions. Sometimes paying a higher closing fee allows you to get a better mortgage rate, which in turn could mean more savings in the long run. It really depends on the lender and the rates terms and conditions of your new loan. It is best to start loan shopping with your current lender. Get all quotes from potential lenders written down and signed. Make sure you know if the quote expires. It usually does expire after 3 business days. In that time though shop that quote around to different lenders and see what their offers are. More often than not they will drop the rate or better the terms or conditions in order to have a better quote to give you. Bringing in a quote will add a lot of credibility to your situation and the potential lenders will know you have options and they have to present the best deal they can. Just make sure to exercise patience and have long term financial goals always in mind. You should not jeopardize your home in order to do something that may or may not actually save you money for some years. That being said, it is a great time to look into refinancing. Mortgage rates have dipped to record lows across the country and the rush to refinance is on.

-M Petrone

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