Many mortgage lenders and banks are offering “No Cost” or “Low Cost” mortgage refinancing options. These are often advertised as a great way for homeowners to avoid paying the thousands of dollars typically required to refinance a home loan. Here are some things homeowners should know when looking into a no cost mortgage refinancing.

At first glance, a no cost refinance seems like a great way to avoid having to pay the typical mortgage refinancing fees and costs, especially for homeowners who are having financial or mortgage problems. While theses refinancing options may provide some benefits to some homeowners, it is best to fully understand what you are getting yourself into. While the fees or costs of refinancing may not be need to be paid upfront, there are often long term costs.

A mortgage refinance option with no costs for the homeowners means that the loan origination costs, appraisal fees, lawyer costs, and other fees will be paid by the mortgage lender or bank. A lot of times, the lender or bank may tie these costs into your home loans total amount, and you will be paying that fee for years, with interest. Although this will prevent you from having to fork over thousands of dollars in mortgage refinancing fees, it is not the definition of “No Cost” by any means. The costs are just over the course of a longer term, and often result in costing you much more due to interest that would need to be paid on this borrowed amount.

While no one will openly admit it, the fact is that often a homeowners interest rates, or total home loan amount needed to borrow, will increase. This increase will help cover the expenses, and generate profit, for the mortgage lender or bank who initially offered this no cost mortgage refinancing deal. While the amount the interest rate or loan amount will increase varies from lender to lender, you can be assured that they are in this to make profit. While this is fair, homeowners need to be sure what the true costs are, as opposed to believing that true no cost refinancing options exist.

While this may not be a bad refinancing option for some people, it will be a bad decision for many. The costs are going to dramatically increase over the length of a home loan which is typically 15 to 30 years. The whole time of the home loan, you will be paying interest on these added fees. Just be careful and cautious when pursuing a no or low cost refinancing option.

-M Petrone

Subscribe via email

Enter your email address:

Delivered by FeedBurner