Our society has developed into a culture where the phrase, “Why pay today when I can do so at a later time” is the norm. This does not include everyone but a large percentage of consumers would not only agree with this philosophy but do so every day. Credit cards are a great example of how a consumer can purchase items and instead of paying the cashier; the card is charged and usually have a month to pay for it. Of course, there are consumers who would not only have the four weeks to pay for purchases made but take it one step further by breaking down how much you will pay each month until the full payment has been achieved.
HSN is a perfect example of this since a person can purchase an item with their credit card but the monthly payments are set up so that each payment is affordable. I can attest to this as I recently purchased a new all-in-one printer from HSN for a great price of $100. Best of all, I only paid $25 upfront and will be able to repay all of it in three months! This philosophy also is used by some Homeowners when it comes to refinancing their home. A Homeowner who has decided that refinancing is needed for a specific reason will usually want to get a loan that will provide the best amount possible while wanting to pay as little as possible up front. One option available to a borrower is to get a no cost refinance. Though this type of a mortgage can be beneficial, it does have its’ disadvantages as well. To put your mind at ease, let’s talk about this type of a refinance as well as if this could benefit a homeowner.
What is a No Cost refinance?
Before deciding on if this form of refinancing will be of any benefit to a borrower, it would make sense to know first what a no cost refinance is. If you are unfamiliar with this, it could be that others call this a no closing cost refinance. This terminology may sound better because it is easier to look at the term and realize that with this type of a refinance, closing costs are not an issue. This is an immediate benefit for those seeking this type of a loan since it will save them from fees such as escrow and recording appraisal, tile insurance credit report and broker and lender fees. Now there are mortgage companies that offer this type of a refinance but they warn that though there are no costs for closing, it is made up by offering it at a slightly higher rate than the norm. So, whether you pay at closing costs upfront or in your monthly interest payments, a borrower will usually have costs that need to be planned for.
Is it Possible to find a Mortgage Seller that would offer this type of a Refinance?
Everyone is familiar with sayings such as, “Nothing good is for free” or “If it sounds too good to be true, it isn’t.” Mostly, those who tend to believe in these philosophies would be correct. What tends to happen is that there are usually facts or details left out that makes a sweet deal turn sour very quickly! However, there are times when these beliefs can be proven incorrect. No cost closings can fall into this category where not having to deal with closing cost can save the homeowner thousands of dollars. The trick is to not having to pay extra cash later down the road as a result of skipping out on closing costs. If you look carefully at lenders, you can find one that could save a borrower a lot of money up front and not having to worry about paying more later on; especially if you are in the house for a long period of time. Also, the Mortgage Seller could have fees such as recording, appraisal, title insurance and others that would be covered by lenders. The philosophies mentioned earlier do not apply to this as it is possible to pull this off but realize it will take a big effort on your part to acquire this. If you can, then this type of a refinance can be totally legit!
When shopping online, it used to be that a customer would look for the best deal that is offered to purchase the item all at once. Given a choice of paying $100 versus $90 upfront would be simple enough to save $10 so long as the qualities for both of them were the same. However, websites such as HSN add to the mix by given the option to make a small payment up front and pay the rest off months down the road. Though the choice to make may sound easy enough, the catch would be that you would most likely pay more for the item that is offered in monthly payments rather than at another website for less that is paid all at once. The same applies when it comes to refinancing a home. Homeowners can be all set to purchase a new mortgage but stop in their tracks when it comes to whether or not to pay for closing costs. This is an expensive decision to make as it can cost thousands of dollars to pay all at once. It would be of no surprise for a homeowner to want to stay away from that and work something out to have them added to the monthly payments. Unfortunately, this can backfire and end up paying a higher monthly percentage rate which would cost more over a long period of time. This is why homeowners need to know the pros and cons of a no cost refinance. Once a mortgagee can fully understand when the right time to either pay closing costs up front is or have it added to their monthly payments, the homeowner will be able to make the right decision that will be justified from closing day right up until the last monthly payment is made.