Is A No Closing Cost Refinance Smart For Me?

Summary

Many mortgage lenders offer “no closing costs” when you do a mortgage.

Here is how to know what is right for you.

Mortgage Loans

When you refinance or purchase a property you will typically have many different closing costs.

These are the costs incurred to get the loan. It can include legal, financial, insurance, government and other charges.

These charges can add up to thousands of dollars, or even more.

Lenders often give the borrower the opportunity to “avoid” paying these closing costs with a “no closing cost option”.

You will have these costs no matter what. The people involved with the loan need to get paid.

What a “no closing cost” loan mean is that your closing costs are folded into the loan. This usually comes in the form of a higher interest rate and a prepayment penalty.

When you are refinancing to take cash out of your property you may choose a “no closing cost” option. This makes sure that you get as much cash out of the transaction as possible. Otherwise some of the cash you take out will be used to pay for your closing costs.

If you are planning to keep the loan for the long-term you may want to pay your closing costs up front. This gives you the chance to get a lower interest rate. This will give you lower overall payments over time.

Keep in mind that even though you may keep a property for a long time you may refinance more than once. This means that the loan you intend to keep for a while may be something you refinance in only a few short years.