Anyone do a no-cost refi?

ZoeMay06 · February 2012

Hi everyone! We bought our home last June and got a great interest rate (4.25). I just got a call from our mortgage broker offering us a no-cost refi now that even better rates are available. It would save us $60k over the life of the mortgage and a couple hundred each month. It seems like a no brainer but I can't help but wonder what the catch is. If you've done this or are familiar with the process can you share your experience?

Sisugal · February 2012

Many no cost refis have the closing costs added to the mortgage balance so you are financing those "free" costs. Check the details.

Whoo · February 2012

We are doing a no cost refi and it is truly no cost (they are not rolling in any type of fee into the loan). The reason it is no cost is because we are new customers to the bank and we are going with a 5 year arm. This is how we qualified for this no cost offer. I shopped around a little bit and did not find any no cost 30 year traditional refi's. I was very excited because I was about to refi with my current bank and it was going to cost over 5,000 in fees.

We live in a townhome and plan to move before 5 years is up. Even if we don't, we can live here for over 10 years and still be paying less interest rate than we are paying now.

Jen&Jeff06 · February 2012

It would be a "no cost" because they are making their money by giving you a slightly higher interest rate. There are still going to be costs involved in a refi, especially if you escrow since they need to collect for your taxes and insurance. You also have title fees, appraisal fees, recording fees, etc. These items are just rolled into the cost of the refi.

Jen&Jeff06 · February 2012

Revise my last sentence...

The costs are rolled into the loan amount of your new mortgage.

Whoo · February 2012

In our case, we are not paying for any of the fees. The appraisal, the title fees, the recording fees etc. are all being paid by the lender. We are adding in our escrow but we will be getting our escrow back from our original lender and will turn around and use it to pay down our mortgage.

ZoeMay06 · February 2012

Thanks. It sounds like I need to get a bit more info before we decide to go ahead with it. In our case though, there wouldn't be a new appraisal - they'd just use the sale of the house since it was so recent. This would be for a new 30 year fixed, just like what we have now, but at .5% lower interest rate. Our broker didn't say anything about closing costs, etc., and said that there would be no cost at all, but I will be sure to ask about all of that.

naylon511 · February 2012

We did. Ours was a load modification though, not a full re-fi. It was truly no cost, just a better rate. No new appraisal, no costs rolled into the loan. The only "catch" was that your loan term was 30 years so you 'started over' at 30. We were only one year into our mortgage so it was totally no big deal.

bls27 · February 2012

We refinanced about a year ago (went from 5.375 to 4.5) and we didn't have to pay ANY closing costs, with the exception of the appraisal which was around $400. There wasn't anything rolled into the loan either.

At the time (and this could still be the case), Fannie Mae and Freddy Mac loans were eligible for refinancing without any closing costs.

It's a great deal!

Anyone do a no-cost refi?

Re: Anyone do a no-cost refi?

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