Interest rates today are at an all-time low. Over the past couple of years they have been hovering at lower than 5%, which, in comparison to the last thirty years, is pretty much unheard of. This is the time you want to purchase real estate or refinance your home into a mortgage that works better for you. Of course, refinancing isn’t free and it isn’t cheap. It can save you money, but not without an investment of some sort on your part. While it is necessary to pay those refinance closing costs, there are steps you can take to ease the burden or reduce the strain on your wallet.
Get the Rates Today with a No Cost Refinance
To avoid paying your refinance closing costs you can try to get a no cost refinance. This option isn’t available for every homeowner in every situation, but if you’d like to put off paying those closing costs it’s worth discussing this option with your lender, to see if it is something available for you.
A no cost refinance isn’t literally a no cost refinance. Instead, you finance the closing costs into the refinance and pay them down with the loan. It does increase the size of your loan and the result is often a slightly higher interest rate, so over time you may end up paying more than you would have if you had paid the costs up front. However, sometimes rolling the refinance closing costs into the new loan is the best option for homeowners because the savings in interest counteracts the extra that has been financed.
To determine whether or not it will be worth it to get a no cost refinance, you’re going to want to get a refinance calculator and crunch some numbers; you will also want to get the advice of a good loan officer. Refinance calculators can give you the break-even point and can tell you whether you will save money by refinancing your loan, and the loan officer will know the details that need to be taken into account prior to your loan closing. As a good rule of thumb if you intend to have the loan long term, it may be best to pay the closing costs up front, but if you know it’s a short term commitment it can be helpful to get a no cost refinance.
Reduce Refinance Closing Costs By Planning Ahead
While the no cost refinance is a good option, it does tend to be a little more expensive in the long run so it’s not always the best option. For those people who are able to plan ahead, doing so will save you money over time. When we say plan ahead we mean to plan to pay the closing costs out of your own pocket either by pulling from savings or creating a fund for the refinance and using the money from that. If you pay the costs up front you don’t have to increase the refinance amount and you are often able to secure a slightly lower interest rate. Short term this won’t be as impactful, but in the long term this is typically the best scenario. So keep that in mind. If you intend to stay with the loan long term, you may be better off paying those costs out of pocket and even paying additional points if possible, because all of these reduce the amount of interest paid.
Negotiating Fees with Lenders
You can save on your refinance costs by negotiating the fees with your lender as well. In many cases you can reduce appraisal fees, title and loan requirements, lawyer expenses, and more simply by working with and discussing these expenses with your lender. While you won’t be able to get rid of them completely, by negotiating with your lender you may be able to shave hundreds off of the final total for the closing costs, and when you’re paying those out of pocket, saving hundreds can be hugely beneficial.
When refinancing you have a couple of options on the type of refinance and you can get some of the closing costs expenses removed, but in most cases the homeowner pays closing costs. Yes, in some cases you can spread the payment out over time, and in many cases you save enough on a lower interest rate that it counteracts the closing costs, but they are still paid one way or another. So it’s up to you to determine which method will be most beneficial for you and whether or not you can find a lender willing and able to give you the refinance you need to experience the financial benefit you want.