Refinance
The truth is most people refinace when its not really worth it.
What is a NO Cost Loan?
This is the best way to find out if refinancing is right for you. A no cost loan is exactly what it sounds like. There are no closing costs. You don't have to pay for any closing cost. What most people do is add it to there loan amount. They are still paying their closing cost but they just financed it over 30 years!! You will still have to pay to set up your new escrow account(taxes and insurance)but your old escrow account will be refunded back. It should be close to the same amount.
How it works?
Let's say the current interest rate is 8%. Now you ask for a NO Cost Loan you are not going to get the interest rate of 8%. They are going to charge you a higher rate to do a NO Cost Loan. Read Things mortgage compaines don't want you to know how they do this. It depends on what your loan amount is but the rate might only be 1/4% - 3/4% higher.
But I want the lowest rate?
Don't get sucked into the trap of wanting the lowest rate. Your payment will be about the same if you do a NO Cost loan or if you roll in your closing cost and get a lower rate. But doing the no cost loan you won't lose any equity.
So When should I do a No Cost Refinance?
Simple if you can get a fixed interest rate that is lower than what you currently have then do it. Even going down just a 1/4% will save you money with no lost equity. If you have 25 years left on your mortgage and you should get a 25 year mortgage. If you can't you can still pay it like a 25 year mortgage ask your loan officer or better yet call your new mortgage company. Those first few years on a thirty year mortgage are almost entirely interest. Read How a mortgage is paid.
How should I get the best rate for a No Cost Loan?
This is the best part. Just call as many mortgage companies you want and tell them you want a No cost loan for a refinace and please fax a Good Faith estimate. The only thing the should need is your loan balance. Tell them you a calling a few mortgage companies and you will want to lock that rate in today and close this month.
If the loan officer thinks this might be a quick and easy loan he will probably give you a better deal. Remember don't let them pull your credit just tell them you have good credit. NO Cost Loans are interest rate sensitive They might not be able to give you the same rate tommorrow so be ready to lock in a rate. Remember the only cost you will be paying is your new escrow account (which your old one will be refunded back to you) and the interest per day. Don't worry about closing refinances on the last day of the month it does't matter. The cost are exactly the same.
Why loan officer's don't like doing NO cost loan?
They don't make as much money. You have taken away one of the ways they make money with extra fees. Now they want to keep those fees to a minimum because it effects how much commision they get paid. You don't have to worry about any extra fees. Just be very clear that you are not going to pay any closing costs except your escrow and interest. If they mess up it should come out of their pocket.
