The Reality Of No Cost Mortgage Refinance
No cost mortgage refinance is a specific program that does not charge you any kind of closing costs for refinancing your existing mortgage.
However, this is not something that is very practical.
Such offers may sound very lucrative, but it is important for you to understand that not every offer is genuinely better than a simple refinancing program that charges some closing costs and other associated fees.
It has been found that most of the lenders that make such offers usually charge a higher rate of interest in comparison to others.
It means that they try to compensate the loss of closing cost with the higher amount of interest.
Therefore, before you decide to go for a no cost mortgage refinance program, make sure that there are no hidden expenses associated with the same and the interest rate is also competitive enough.
Ask Questions In order to play safe, you are recommended to ask questions to the lending company, such as why they are not charging any closing costs while others are charging.
If you are satisfied with the explanation of the lender, only then should you opt for such loan offers.
Make sure that they are not trying to hide the loan fees in other things.
The most common practice is to raise the rate of interest a bit higher to cover those costs.
Yield Spread When you agree to sign up for a no cost mortgage refinance at a higher rate of interest, the lending company gets a commission from the additional amount of the interest.
This commission is used to pay off the closing costs on your behalf.
In financial terms, such commissions are known as yield spread.
Such things are becoming very popular among many lenders.
Borrowers get into the trap very easily with such lucrative-looking offers.
It sounds really good that you do not have to pay thousands of dollars for closing costs upfront.
But, if you calculate the additional amount of interest that you will be paying over the course of loan, you may find the deal quite expensive.
Still, if you are one of those who do not have sufficient money to pay off the closing costs upfront, no cost mortgage refinance program may be the right option for you.
Overall, when you consider this type of borrowing option, you have to keep two important things in mind.
One, you have to think about the amount of closing costs that you will be saving upfront and the second is the overall cost of the entire loan.
However, this is not something that is very practical.
Such offers may sound very lucrative, but it is important for you to understand that not every offer is genuinely better than a simple refinancing program that charges some closing costs and other associated fees.
It has been found that most of the lenders that make such offers usually charge a higher rate of interest in comparison to others.
It means that they try to compensate the loss of closing cost with the higher amount of interest.
Therefore, before you decide to go for a no cost mortgage refinance program, make sure that there are no hidden expenses associated with the same and the interest rate is also competitive enough.
Ask Questions In order to play safe, you are recommended to ask questions to the lending company, such as why they are not charging any closing costs while others are charging.
If you are satisfied with the explanation of the lender, only then should you opt for such loan offers.
Make sure that they are not trying to hide the loan fees in other things.
The most common practice is to raise the rate of interest a bit higher to cover those costs.
Yield Spread When you agree to sign up for a no cost mortgage refinance at a higher rate of interest, the lending company gets a commission from the additional amount of the interest.
This commission is used to pay off the closing costs on your behalf.
In financial terms, such commissions are known as yield spread.
Such things are becoming very popular among many lenders.
Borrowers get into the trap very easily with such lucrative-looking offers.
It sounds really good that you do not have to pay thousands of dollars for closing costs upfront.
But, if you calculate the additional amount of interest that you will be paying over the course of loan, you may find the deal quite expensive.
Still, if you are one of those who do not have sufficient money to pay off the closing costs upfront, no cost mortgage refinance program may be the right option for you.
Overall, when you consider this type of borrowing option, you have to keep two important things in mind.
One, you have to think about the amount of closing costs that you will be saving upfront and the second is the overall cost of the entire loan.
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