No Out-Of-Pocket Cost Refinance

“No Out of Pocket Cost” is a refinance promotion that’s swirling around the mortgage lending industry. With all of the talk about being able to refinance your home into a lower fixed rate while at the same time having no out of pocket cost, more and more individuals are looking for answers as to whether or not they should go with a refinance that doesn’t cost them anything. In this article we’ll go over what no out of pocket cost means and help you determine if it’s right for you.

What Is The Catch?

You’re probably wondering how a lender is able to offer you a no out of pocket cost refinance while still allowing you to lower your monthly payment as well as your interest rate. The bottom line is nothing is free. In order to justify a no out-of-pocket cost refinance, your lender will typically raise your interest rate 0.125 to .25 of a percent to cover the closing costs if you decide to not pay it up front or if the fees are added to the principal you may be assessed a higher loan balance. Note that the application, credit check and title search are all complimentary.

Without the No Out-Of-Pocket Cost Refinance

Closing costs can be quite substantial. Typically the costs to close will be anywhere from 1.5 percent to 2.0 percent of your loan balance. Meaning on a $150,000 mortgage, you could be looking at $2250 to $3000 to close. This is generally too large for the standard borrower and so they decide to do the refinance.

Different Forms of Closing Costs

You must remember that no closing costs doesn’t mean no costs whatsoever, it simply means at closing there is no costs. Lenders have many ways of rolling those costs into the loan somehow. Here are the most common ways:

• Pay At Closing. This is the standard way of paying and simply consists of you bringing a check for the proper amount to your mortgage closing. Your lender usually lets you know a day or two in advance just what the closing cost is going to be.
• Rollover. This method is when the lender simply rolls your closing costs into the balance of your new mortgage as opposed to you paying it out of pocket. With this method you’ll pay a bit more each month on your payment.
• No Out-Of-Pocket Cost Refinancing. You won’t get charged any closing costs with this method, but your interest rate will be slightly higher to allow the lender to cover those costs.

Get your free rate quote today and get started saving money on your monthly payment.