The Truth About No Cost Refinance Loans

Have you seen the ads for no cost refinance loans? Mortgage lenders will often market these so-called zero cost loans as a way to attract new customers looking to refinance their current mortgage. While these refinance home loans may seem attractive at first, homeowners should be aware there is no such thing as a no cost mortgage.

There are always costs involved with a home loan, whether it be a first mortgage or a refinance. The amount of fees that are required, who will be responsible for paying them, and how they are paid allows a lender to market no cost refinance loans.

If you are a current homeowner who is considering refinancing your mortgage, here are a few tips to consider about no cost refinance loans.

With mortgage rates at historic lows, it is hard not to consider refinancing your current mortgage. Whether you are interested in lowering your monthly payments, knock years off your mortgage, or get cash out for a major project - refinancing can help. If your lender is trying to sell you on one of these no cost refinance loans, here are a few tips to remember.

• All loans have costs, no matter what.
• Remember that banks and lenders are in business to make money, which is why every loan will come with some closing costs.
• Always ask to see a good faith estimate once you have spoken to a lender.
• Know your remaining principal, interest rate, and number of remaining payments on your current mortgage.
• Some lenders will add the closing costs back into the new loan which means you will be paying interest on this money.
• It is possible to lower some of the closing costs by asking the lender to waive some of the fees.
• Refinancing through your current lender will usually cost less as they are more likely to waive certain fees.
• Try to close towards the end of the month to lower any prepaid interest.
• Ask to see a copy of the loan documents prior to your closing date. Make sure your new loan amount is what you expected it to be and that your interest rate is what you negotiated with the lender.
• Never sign any loan documents that you do not fully understand.

This list of tips are just a few common sense ideas that can help you protect yourself from a predatory lender. The most important thing to remember is to educate yourself about the new loan and ask your lender tons of questions.

If you think no cost refinance loans are too good to be true, then you are right. While a mortgage lender may market a loan as no cost, be careful of where these costs may show up. Often times, the lender will add back these fees into the new loan amount, meaning you are now paying interest on this money.

Refinancing your mortgage can be a great way to save money. Just make sure you fully understand the details of your new mortgage, including how the closing costs are to be paid.

Have you recently refinanced your home loan? How were the closing costs paid for?