Is there really such thing as no cost refinance??

[njcarita]

we just refinanced, and already rates are much lower! Anybody ever done two in one year?

I was just thinking the same thing... we've refinanced at just over a year.... but not at under..

 

[Abbie]

We refinanced with our existing lender - CHASE. They also offered us a no cost refi 30 yr 4.5% with NO closing costs, fees, appraisel, etc. Notary showed up at our door. We signed some papers and it was done.

Our mortgage is now $300 less/month but we plan on paying our regular payment PLUS one extra payment a year which will turn our mortgage into a 15 yr vs a 30 yr. It's just nice to know that if we hit hard times, we can default to the lower payment - if we have to.

I was told not all Chase customers were offered this... we do have excellent credit, no debt but the house and a good amount of equity. I think they also got wind that we were shopping around. When I called in and spoke to a rep, the closing costs and rate were CRAZY high. We were about to pull the trigger with a local bank, then out of the blue an over-nighted FEX EX letter showed up at our door - from CHASE with this offer. We were about to throw it away since it started off with something along the lines of "You have been chosen" Ok, how many times do we get letters in the mail telling us "we have been chosen"?? They hit the trash can before they're even completely open!

But glad we kept the Chase letter... it ended up being a great deal.

We got the same deal, even down to the FedEx letter. I tossed it on my desk intending to look it over this weekend but I'm glad I looked earlier since it expired after just three days. Our interest rate only dropped one percentage point, but it saves us $300/month and I'm planning on doing the same thing you are, continue with the higher payments. In effect it will be like making 3 extra payments in the year. And there literally is no cost to this, none at all, only my time on the phone call.

And I think you are right about them figuring you are shopping! I had called a few weeks ago to scope out rates but dropped it when one of the costs was for "application fee"....I don't have any interest in applying to something when I am already a customer!

 

[Carol NJMB]

We are also WF customers. We are planning on moving in 2 years when our HS sophomore daughter graduates. We want to downsize and stop paying 18.5K in property taxes. Just wondering if it would worth it to refinance? Both our credit scores are over 700 but less then 800. Looks like we could save close to $600 per month. Sure is tempting. Right now our APR is 6.375%. Any thoughts?

That's a no-brainer. What's there to think about? Multiply 600 x 24. Isn't that much less than the cost of any refinance?

That math adds up easily.

 

[Carol NJMB]

Credit report, title costs, settlement costs, your new impound account, etc. These are all costs that I expect, what I was confused about is when a bank is offering 0 points and then the expected closing costs run the gammet from 4k - 10k. What are they charging for? I could understand it if you were paying points but if it's supposed to be 0 points it just doesn't make sense to me, Dh and I both have very good credit and we do have equity in our home although it's probably down to something like 10 - 15% at this point (used to be closer to 40%). Got a call from wells fargo last night we'll see what they have to offer once I get back to them, but it will likely be Monday before I can get ahold of them. Thanks for all the replies.

Tina

Hey Tina,

Points and closing costs are 2 separate animals - or I should say "can be" 2 separate animals.

Points are fees to buy down the interest rate. This will be shown as a cost on your Good Faith Estimate and HUD 1. To reduce the total costs, ask for a rate w/o points.

But even with points, you still incur the "real" costs of closing the loan - title insurance, the closing fee, commitment fee, appraisal, interest, flood cert fee, etc. These "real" closing costs are not classified as "points."

I am in the mortgage business and it pains me to see stuff like this where whomever is your loan consultant did not do their job to explain the costs and how things work.

Good luck Tina.

 

[Carol NJMB]

I mean truly no cost. I'm not talking about rolling closing costs into the mortgage. I keep reading about people refinancing now since the rates are so low, they claim that they've received a no cost refinance but every bank website I've checked has the normal closing costs. How do you go about finding a real no cost refinance? Do they even really exist?

Tina

The "true" no cost loan is rare. Borrowers are going to pay the cost of a loan either by adding the costs to the loan or getting a higher rate.

Fees are always involved with getting a mortgage. Numerous fees, and they are all legitimate fees often charged by third parties. Those third parties want to be paid and the lender is not going to reach in their pocket to pay them.

So if you are told your mortgage is "no cost" and you want to be certain, just get a quote for a "cost" refi from a different lender - or perhaps check 2 other lenders. To be absolutely sure you are comparing apples with apples, you must get the quotes on the same day. You cannot compare Apples Mortgage rate today with Bananas Mortgage rate tomorrow.

Lenders throw around the "no cost refi" a lot because borrowers like it.

But no costs out of your pocket does not mean you didn't pay a cost.

 

[stacy2197]

I didn't read all the responces but I refinanced for free with my credit union a couple years ago. When I recently refinanced it cost me 250.

 

[Skatermom23]

The "true" no cost loan is rare. Borrowers are going to pay the cost of a loan either by adding the costs to the loan or getting a higher rate.

Fees are always involved with getting a mortgage. Numerous fees, and they are all legitimate fees often charged by third parties. Those third parties want to be paid and the lender is not going to reach in their pocket to pay them.

So if you are told your mortgage is "no cost" and you want to be certain, just get a quote for a "cost" refi from a different lender - or perhaps check 2 other lenders. To be absolutely sure you are comparing apples with apples, you must get the quotes on the same day. You cannot compare Apples Mortgage rate today with Bananas Mortgage rate tomorrow.

Lenders throw around the "no cost refi" a lot because borrowers like it.

But no costs out of your pocket does not mean you didn't pay a cost.

This is absolutely true! I just did a refi and paid about $2800 out of pocket to do so. It was the cheapest option I found, including one that was a "no cost" refi. The companies are going to get their money one way or another. It will either be in your out of pocket cost, a higher rate or your discount points. You really have to compare the loans to determine what is best.

Sure I could have taken the "no cost" refi but the rate wasn't as low as the one I eventually settled on, which in turn means less total interest paid. Companies do like to throw that phrase around though and hope people don't shop around.

 

[Abbie]

This is absolutely true! I just did a refi and paid about $2800 out of pocket to do so. It was the cheapest option I found, including one that was a "no cost" refi. The companies are going to get their money one way or another. It will either be in your out of pocket cost, a higher rate or your discount points. You really have to compare the loans to determine what is best.

Sure I could have taken the "no cost" refi but the rate wasn't as low as the one I eventually settled on, which in turn means less total interest paid. Companies do like to throw that phrase around though and hope people don't shop around.

I just had our settlement last Friday. The associated costs were listed on the HUD statement, then backed out on a later line. There were truly NO costs to me, none at all. I don't know who paid them, I'm guessing the lender? They were the ones with the offer. I know the costs got paid, just not by me.

 

[Skatermom23]

I just had our settlement last Friday. The associated costs were listed on the HUD statement, then backed out on a later line. There were truly NO costs to me, none at all. I don't know who paid them, I'm guessing the lender? They were the ones with the offer. I know the costs got paid, just not by me.

Perhaps your interest rate was a tad higher than the competitive market rate? The lender will then recoup cost this way and you pay nothing more up front. I'm not suggesting there is anything wrong with this, just that lenders are not giving away free refi's.

 

[Weluvdisny]

I work for a local bank and we offer no closing costs Home Equity Line of Credit mortgages and fixed rate Home Equity/Home Improvement loans. We offer to pay the closing costs because the customer signs a rider at closing stating that they will not modify, discharge or get another loan from either us or another bank within 3 years or the customer has to pay a set fee depending on how much they borrowed. Said minimum set fee is $1,250.00 and maximum is $1,750.00.

People grumble when they end up selling their house or need to pay off their loan within 3 years for whatever reason and have to pay the closing cost fee. They don't realize that the set fees are still lower than if they went through an actual mortgage and had to pay closing costs.

 

[Abbie]

Perhaps your interest rate was a tad higher than the competitive market rate? The lender will then recoup cost this way and you pay nothing more up front. I'm not suggesting there is anything wrong with this, just that lenders are not giving away free refi's.

Yes, the interest rate was higher (4.75) than market, but that was still a full percentage lower than we were already paying. I don't understand how that saved them any costs since it was not a new loan to them (same lender, same terms). We didn't solicit the refi, they came to us and I don't really know what they are getting out of this. I'm sure I'm missing some key point but I don't really understand why they offered this and what the benefit was to them. Not that I'm complaining!

 

[Carol NJMB]

I work for a local bank and we offer no closing costs Home Equity Line of Credit mortgages and fixed rate Home Equity/Home Improvement loans. We offer to pay the closing costs because the customer signs a rider at closing stating that they will not modify, discharge or get another loan from either us or another bank within 3 years or the customer has to pay a set fee depending on how much they borrowed. Said minimum set fee is $1,250.00 and maximum is $1,750.00.

People grumble when they end up selling their house or need to pay off their loan within 3 years for whatever reason and have to pay the closing cost fee. They don't realize that the set fees are still lower than if they went through an actual mortgage and had to pay closing costs.

Yes, there is much more likelihood of getting a home equity loan or line of credit with no costs. Different animal.

Many borrowers are not aware they have to pay that fee if they close out the loan early. The typical case of not reading the fine print.

 

[Carol NJMB]

Yes, the interest rate was higher (4.75) than market, but that was still a full percentage lower than we were already paying. I don't understand how that saved them any costs since it was not a new loan to them (same lender, same terms). We didn't solicit the refi, they came to us and I don't really know what they are getting out of this. I'm sure I'm missing some key point but I don't really understand why they offered this and what the benefit was to them. Not that I'm complaining!

Assuming you have good credit and at least 20% equity in the home and didn't take cash out, a 30-year rate of 4.75% is much higher than market - as of recent. That gave the lender a ton of funds to pay closing costs.

The best way I can explain is this: If I pay $5.00 for a book, but I sell it to you for $50.00, then I can cover more expenses & make more profit than if I sold it to you for $30.00. Your mortgage is a product - it has a price based on what you paid for it and what your lender can sell it for - and the lender can sell it for a profit. Any amount earned above total costs is pure profit.

But you both won. You got a lower payment at minimum cost & they kept a loan on the books.