Exploring the Reality of The Refinance No Closing Costs Option
By: Ask Bill
Submitted: 2010-12-13 04:40:58 | Word Count: 630
When my good friend Sarah mentioned to me that she wanted to refinance her home a couple of years ago, I advised her against the idea as she was struggling financially at that time. I explained to her that refinancing her home would require her to pay a large sum of cash for closing costs, something that she could not afford at the moment. She persisted, and ended up signing up with a financial institution that offered a mortgage refinance package that charged her zero in terms of closing costs. This refinance no closing costs option did appeal to her then as it allowed her to refinance almost immediately without having to fork out cash to pay for the closing costs.
Nevertheless, she failed to realize that the company in reality hiked up the interest rate slightly above market rate, and made up for the closing costs loss by charging an extra 0.25% of interest for the next 20 years of the mortgage loan. The refinance no closing costs option might have been attractive at the start of the deal, but if you perform your calculations right, you realize that you would end up paying thousands of dollars more in terms of interest for the duration of the loan. Thus although some mortgage refinancing companies advertize and market refinancing plans with no upfront or closing charges, you need to be certain that the interest rates that are offered to you are competitive and according to market rates as well.
[ advertisement ]
Sarah’s experience taught me plenty, and increased my awareness in this field of mortgage refinancing. Today’s competitive nature of the mortgage refinancing scene has prompted many financial companies to lower their interest rates. Thus you would be able to find more attractive and competitive mortgage refinance packages if you are in the market for one. To refinance mortgage with bad credit might have been almost impossible in the past, but due to the competitiveness of the mortgage refinancing market, things are different today. If you have a low credit score, you might not obtain the most attractive of refinance packages and might need to be content with slightly higher interest rates, but lenders would still offer mortgage refinancing packages for your benefit.
And with help from the central government through the Making Home Affordable (MHA) programs, you could explore the mortgage modification option as well through the Home Affordable Modification Program (HAMP). Through this program, those with bad credit could effectively decrease the interest rate of their loans, or extend the duration of their loans to make their monthly repayment amount more affordable. Banks and financial institutions have been encouraged by the central government to take part in this initiative, and due to this you would have plenty of options to choose from if you want to take part in the HAMP scheme.
On the other hand, if your credit score is in good shape, you should without doubt explore the option of conventional mortgage refinance. With a good credit score backing you up, you would find a large number of lenders willing to extend flexible mortgage refinance packages with low interest rates for you to select from. You may choose the one that not only offers the lowest interest rate, but also the most flexible in terms of repayment facilities as well as the flexibility of the package itself. You could also opt for a refinance package from a legitimate and established financial firm as a security measure.
Remember, successfully refinancing your mortgage would allow you to save thousands of dollars in the long run. Thus if you have the opportunity to and are eligible to refinance your home, you should take up this option. Choose wisely!
