How To Get A No Closing Cost Refinance

If you want a no closing cost refinance do not expect the lowest interest rate. The no cost refinance is accomplished through a higher interest rate where by all of the fees are paid by the lender.  You may still need to pay for a credit report and an appraisal.

One of the main benefits of a no cost refinance is that you will not be adding to your principal amount owed. Obviously adding the closing costs to your loan will raise the monthly payment but it will also increase the amount of interest paid during the life of the loan.

Here’s how a no cost refinance works. Let’s say you would qualify for an interest rate of 6%. With a no closing cost refinance your interest rate might be 7.375%. Does this make sense to do? Maybe.

Here are a few reasons when a no cost mortgage refinance makes sense:

If you are lowering your interest rate.

If you are shortening the pay back term. For example going from a 30 year loan to a 20 or 15 year loan.

If you are planning on selling your home shortly.

There are two main things to think about when considering a no cost mortgage refinance:

1.        If you are planning on living in the home for an extended amount of time it may be worth the costs associated with a refinance to get the lower interest rate.

Find out what you monthly savings would be if you went with the lower interest rate versus the no fee interest rate. Divide the monthly savings into the cost of refinancing. This will show you how many months it will take to recoup your closing costs. If you are planning on living in the home longer then what it would take to recoup your costs. You would be better off not doing the no cost refinance.

2. Would a lower monthly payment help you out financially?

Would the monthly savings between the two interest rates make a significant financial difference to you. If so you may want to consider paying the closing costs.