No closing cost refinance is when a lending institution includes all costs for a loan as part of the loan instead of charging for things like property appraisals, credit reports, lenders fees, perhaps even brokerage fees, insurance, escrow charges and other costs that may be part of the normal loan process. In exchange for a refinance with no closing cost, you will be charged a slightly higher interest rate.
Short on Cash?
A no closing cost mortgage refinance may be a bad idea if you are applying for a long-term mortgage because you be will end up paying interest on these costs for a long time. However if you are applying for a short term mortgage, 5 years or less, and at the time of the application you are short on cash, then it may be a good option.
Does the Lender Wave the Fees in a “no closing cost refinance loan”?
The loosely used term “no closing cost refinance mortgage” or a million other similar terms that lead one to believe there are actually no costs to refinancing or closing a mortgage deal, are misleading. Why? Because ALL mortgages and ALL refinancing will have closing costs. No one works for free, especially financial instructions, banks and private lending companies whose business is money. The offer to package the costs and hide them inside the loan itself is what constitutes a “no closing costs refinance package”. It conceals the costs at the outset but you do eventually pay them. The lender does NOT wave these costs or eliminate them nor does the finance company pay them for you.
Refinance Mortgage No Closing Cost – Pros and Cons
There are very few times when refinancing without paying the closing costs in cash makes sense. Those times are when you really have no cash on hand and you must close the deal. The second way you might actually choose this option is if you plan on selling the house or property within 5 or less years. The third condition is that you will refinance again soon because you believe interest rates will drop so the current “no closing cost home refinance” is merely a temporary situation.
Want the lowest possible interest rates?
If you want to ensure you receive the lowest interest rates, and don’t want to needlessly increase the debt on your home, then you will want to stay away from the expensive no closing cost refinance loan and pay the costs in cash and get a better overall rate on your mortgage.
