No Closing Cost Home Refinance - Understanding the Facts

Are you in search of a no closing cost home refinance? With interest rates at all-time lows, now may be the best time to consider refinancing your home to lower your monthly payment, shorten the length of your loan, or take cash-out to make home repairs. One of the biggest hurdles that many homeowners face when refinancing is paying for closing costs.

While there are such things as a no closing cost home refinance, there are several misconceptions out there. As a homeowner looking to refinance, it is imperative you get all the facts before applying for a new home loan. Here are a few things to consider.

If you are in search of a no closing cost home refinance, then make sure you and the lender agree on the terminology. Does the loan come with any points? If it does, then you could be paying much more over the course of the loan which could make the refinance cost more than what you are paying now.

Is the lender simply rolling your closing costs back into the overall loan amount? This is often called a no cash refinance because the borrower does not bring any money to closing. However, it does not mean that there are no closing costs. They are just being paid in a different manner than directly to the lender at closing.

An actual no closing cost home refinance means that the lender collects no fees and pays any other costs on your behalf. Some loan officers may help cover some or all of the closing costs by using a lender credit. Be sure to check with them and completely understand all closing costs and who is paying for them, regardless of when they are paid.

Regardless the type of refinance loan you apply for, there will always be a few unavoidable closing costs. Even if the lender agrees to cover all origination fees and third party costs, there are a couple expenses they will not cover.

First, the borrower will always be responsible for paying any prepaid interest on the new loan. This is the interest the lender charges from the date of closing to the first day of the following month. The interest can be minimized by closing at towards the end of the month as opposed to the beginning. The fewer days till the next month, the less interest that is owed.

The second expense that will need to be covered by the borrower is escrow, if that is how they choose to pay their taxes and homeowners insurance. Homeowners who do not pay for taxes and insurance through an escrow account will not need to worry about this expense. Another thing to keep in mind is that if you are currently paying escrow, then you should receive a credit for any remaining balance you currently have.

Wile there are a few expenses that you can expect to always pay, even on a no closing cost home refinance, they are basically adjustments that need to be made between the old and new loans. They can fluctuate based on the month and day of the month you choose to close.

A home loan refinance can be a great way to take advantage of the struggling economy. There may never be a better time to lock in a low rate on one of your biggest monthly expenses. Don't let the closing costs get in your way of saving money on your home. Educate yourself by understanding the facts of a no closing cost home refinance so you are prepared to speak with a loan officer.

Have you had any success with a no closing cost refinance?