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"No Closing Cost" Refinance

"No Closing Cost" refinance has not been clearly explained by mortgage bankers and I want to accurately describe the process. For most of my clients, a common goal in a refinance transaction is a lower monthly payment without having to pay a lot of cash "out of pocket". To meet this need, we have developed two  "No Closing Cost" Refinance Programs. As always, please email me with any questions about a no closing cost refinance

1) Use the "yield spread premium".  Under this no closing cost program, we will pay all of the closing costs associated with your loan for you. You incur no closing cost in the refinance transaction. We use what is referred to as the "yield spread premium" from slightly higher than market interest rates to pay these costs for you. While we can pay both your closing costs (the true cost of the transaction)  and prepaid items (escrow items for taxes and insurance), many of our clients using the program decide to have us pay only your closing costs. This is because your current lender has an escrow account with approximately the same amount we will require to establish a new escrow. Your current lender will refund their escrow account usually 30 days after closing. If you want to settle with no cash, we can pay both your closing cost and escrow, you will get a refund in about 30 days effectively taking some cash out of the property but your interest rate will be higher. 

Depending on your loan amount, "No Closing Cost" refinance is typically .375% higher than our zero point, no origination fee quote. The beauty of the no closing cost refinance program is that you can lower your payment at any time the no closing cost rate is lower than your current rate. The old "rule of thumb" was that you had to lower your rate by 2 percentage points for refinancing to make sense. Using the "no cost" approach, I frequently have clients lower their rate and payment when the "no cost" rate is only .500% lower than their current rate. There will never be a prepayment penalty so you can lower your payment at any time it makes sense.

2) Roll in your closing costs. Under this program, assuming you have equity in the property, we can add your closing costs and/or escrow amounts to your loan balance. The advantage is that you will pay market rates (we do not have to increase the rate to get a yield spread premium as above). All the comments about closing cost/escrow amounts above apply. Rolling in your costs can be a better option for a "no cost refinance" if you have the equity and expect to remain in the home for more than 5 years. Consider this, if you have a $100,000 mortgage balance, and the market is at 6% without points, we may have to increase the rate to 6.250% to get enough "yield spread premium" to pay your costs, but if your costs are only $1,000, added to your balance will only be a negligible increase in your payment. As always, tell us what you are trying to do and let us give you some options when looking into a "no cost" refinance.

Calculate your "No Closing Cost Refinance Payback Period"  to verify refinancing makes sense in your specific situation.

* I have included a section on the new Cash Flow ARMS. A LIBOR based product which gives you complete flexibility in managing your mortgage.

If you already have an excellent rate on your first mortgage, I have extensive information available on home equity loans and a home equity line of credit as well

Learn more about Loan Modification. If you can not refinance, it may be the best way to save your home today.

If you have had credit issues in the past, it is absolutely critical in today's market that they be addressed before you try to get a mortgage. I have referred my clients to CreditFX for the past 5 years. Exceptional customer service and I am often stunned at what they have been able to have removed from people's reports, allowing my clients to qualify. Their charge of $199 is one of life's true bargains.

Brand New! I have purchased new financial modeling software that can do sophisticated analysis of your situation today as well as make suggestions on how small changes in how your mortgage is structured today can have a life changing effect in the years to come. Modules available include the Total Cost Analysis to compare the cost of up to 4 loans over the length of time you plan to be in the home; an Equity Repositioning Analysis to see how small changes in your debt structure today can have a huge impact in years to come; a Consolidation Analysis to see how consolidating debt can change your financial future; a PMI Analysis to see if eliminating PMI will be effective for you; and a Rate Watch Report which all my past clients are enrolled in to insure they remain in the mortgage that is best for them in their current situation. If any of these free analysis are of interest to you, please email me with as much specifics of your situation as possible

No Closing Cost Refinance Prequalify for your No Closing Cost Refinance


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