Mortgage Refinancing Information-You Can Avoid Paying Closing Costs When Refinancing Your Home
When mortgage refinancing for the short term, you can significantly reduce your out-of-pocket expenses by avoiding closing costs. This is the no-fee, no-points mortgage you see advertised and you can use this type of mortgage to your advantage even though the lender is not being completely honest about the loan. Here are several tips to help you avoid paying closing costs when refinancing your mortgage loan.
The catch lenders dont talk about with their no-fee mortgages is that you do pay in the form of a higher mortgage interest rate. How can you tell if taking a higher mortgage rate is a fair trade off for not paying closing costs? To make this determination, first divide the sum of your potential closing costs by the amount of your mortgage loan. Suppose your closing costs are $3,800 on a $225,000 mortgage loan. Divide $3,800 by $225,000 and youll get .017; this is the same as paying 1.7 points, or 1.7% of your loan amount.
Discount points reduce your interest rate by .25% for each point you pay. In this case the lender is actually taking back points, raising your interest rate. In this example assuming you originally qualified for a 5.8% mortgage your rate would increase to 6.0%. The difference in your payment amount on a 30 year, fixed rate loan would be approximately $71 per month more without paying closing costs.
In this example you save yourself $3,800 because the lender footed the bill for your closing costs. Your monthly payment amount is still $71 higher than it would be, but youd have to pay almost four thousand dollars out of pocket to get that rate. If you plan on refinancing this loan in less than four years youre still ahead of the game by foregoing any closing costs.
You can learn more about your mortgage refinancing options, including costly mistakes to avoid with a free mortgage tutorial.
To get your FREE six-part Mortgage Refinancing Tutorial, visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this free video tutorial: \"Mortgage Refinancing - What You Need to Know,\" which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit Refiadvisor.com.
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