No Cost Refinancing
Lately you could have watched the advertisement for the Countrywide “no cost refinance“, a mortgage program that guarantees no out of pocket expenses or fees by the time you refinance your current mortgage.
It is definitely a subject worth revisiting to ensure people understand what they’re getting when they choose a no cost refinance option, while this kind of offer is by no means a new concept.
Essentially, a no cost refinance is a transaction of a loan which the broker or the loan defrays completion costs, counted on typical fees like loan origination points, title/escrow fees, appraisal fee, and processing and underwriting fees, and etc.
A lender or a bank could also bundle the closing costs you have on top of the sum of your loan, making it a “no cash” loan and increasing the size of your loan. Even if you can get through the upfront fees and out of pocket expenses, the loan is not a real no cost loan, and these costs are not lender paid.
So how do lenders and banks make up for the unavailability of fees that usually must be paid?
The real thing in this circumstance is that these kinds of loans will definitely increase your interest rate, occasionally dramatically in order to make up the loss fees that are normally charged at closing.
Note that some programs might include all costs, while others might still charge you for particular third party fees like points, taxes, insurance, and interest, and also remember that no cost refinance will vary by lender.
The brokers of Mortgage Refinancing can setup a no cost refinance for you too, adjusting the premium of their yield spread to the point where they make sufficient money to offset the fees related to the loan.
