No Cost Refinance
Have you ever heard “you can refinance your loan
with NO COST, NO POINTS, and NO FEE’S and wondered if this is true? I know it is rare, but this advertisement is
actually telling you the truth. In most
cases it is possible to refinance your loan with no cost and no fees. What you need to know is that if it is
possible, then anyone can do it for you.
It is not a special program that some people can offer or can only be offered
for a limited time, it is actually available for most people and by every Loan
Professional.
It is extremely important to point out that the
government is trying to change the compensation of some parts of the industry
and Loan Professionals. If this happens,
it will be a terrible thing for you, as the borrower. If the Loan Professional cannot get
compensation from your interest rate, it is impossible to do a no cost
refinance.
Is it
really possible to refinance my mortgage with no closing cost?
Yes. It is
absolutely possible and legal. How it
works is that a Loan Professional gets compensated 1 of 3 ways, no matter if
they are a Broker, Banker, Direct Lender, or any other type of lender.
1. The Loan
Professional charges up front cost and fees and gives you the lowest possible
rate.
2. The Loan
Professional charges you no cost and no fees and gives you a slightly higher
interest rate.
3. They do a
combination.
Keep in mind that this is absolutely how it works
whether you are disclosed this compensation or not. It happens with every loan. This compensation is sometimes called Yield
Spread Premium (YSP), but banks don’t disclose it as YSP even though there is
compensation for you taking the higher interest rate.
How do
I know if a No Cost Refi is the right option for me?
This comes down to working with a Loan Professional
that will show you loan options. There
is an easy way to compare. Just take the
monthly savings and the closing cost associated with getting the lower rate and
sees how long it takes to save the closing cost based on the lower payment. For Example if you are saving $60 a month,
and the closing cost are $3000, then it will take 50 months to save
$3,000. In this example if you are going
to be in your loan for more then 50 months, then this might be the right option
for you.
Can I
buy a home with No Closing Cost?
Yes. It
works the same way as in a refinance.
You will pay a slightly higher interest rate, but the Loan Profession
should be able to structure your purchase loan the same way. There are many loans that allow “Interested
Third Parties” to pay your closing cost or down payment too. Interested Third Parties can be Sellers, Real
Estate Agents, Builders or Loan Professionals.
With this said, it is perfectly possible to buy a home without paying
the down payment or the closing cost.
Who
pays the Cost?
If you are doing a No Cost loan, then the closing
cost is paid through the Interest Rate.
No matter who does your loan you can always pay more cost or fees and
get a lower rate, or pay fewer fees and take a slightly higher rate. If the closing
cost on your loan is $3,000, then the Loan Professional will increase your
Interest Rate to receive an extra $3,000 in compensation. This $3,000 is then applied to the $3,000
closing cost which makes your loan a No Cost loan, this was not extra
commission it was just a different way to use the compensation.
It is extremely important to know that a No Cost
loan is great for some, but not for others.
Just like getting any loan, make sure you understand your options and
compare others. Weigh out the pros and
cons and see what fits your personal situation.
The main reason why you may not be able to do a No Cost loan on a
purchase or refinance is if the loan amount is low, usually about $150,000 or more
is the perfect loan amount, but your Loan Professional can tell you
specifically.
It is easy to see if a No Cost No Fee Loan is right
for you. Just apply now and LendEthics will match you to several Loan Professionals
that can help you see if a refinance of any type is right for you.
