In this odd financial time there are many odd and weird terms and programs that are running around. The average could get lost in this sea of refinance, finance, re-mortgage, no rate mortgage, reverse mortgage, no cost refinance, and even the no cost reverse second financing. To most people they aren’t sure if these programs were created just for this economic crisis or if these programs always existed. Buyers worry if these are programs that banks are using to make money and trying to profit off of the people who are truly in trouble.
What are these no cost refinance loans that are being talked about? The term itself is a practice that has been going on for many years. This is the official term for the time when the buyer does not have to pay the “closing” costs. The price is either eaten by the seller, paid buy the seller, or it is ramped into the price of the item that is being bought. This is usually in a mortgage or land deed negotiation.
Many people have heard of “closing costs”, but what are the closing costs that are going to be paid in a no cost home loan refinance. The normal closing costs are the fees for the Appraisal, the Credit Report, the fee that the administrative fees to the lenders, any fees that the money brokers is charging, insurance on the title, fees to record the buying and selling into the state documents, and the fees to start escrow. In general, these fees are all the administrative and copy fees. These are also called the recurring costs, which means costs that are constantly coming up in this type of deal. These fees could equal many thousand dollars, depending on the prices of the services. This sounds like a great deal, and getting rid of fees are always a great thing to do.
However, are there any fees you are responsible for. This is a question very few people ask and are confused when they arrive at the table of a no cost refinance and they are asked to pay a price. There are many fees that you are responsible in this no cost refinance loan. These fees are the more expensive of the house buying expenses, and a large chunk of change to any person. The buyer is responsible for the property taxes at about $100,000 to $100 depending on the state. The buyer is also responsible for the 5-10% interest on the porice of the loan. Then finally the few hundred dollars that is the premium of starting a nerw insurance policy. That means the cost the buyer could be asked for could be upwards into tens of thousands of dollars. This is all to refinance the house, not buy it, a no cost home loan refinance.
The reason a person would go through with a no cost refinance of their house would be to lower their monthly payments, and increase their cash on hand. When a home owner does this, they can effectively pay off their loan quicker. They also have the ability to pay off other bills that have been negatively affecting them. When a person goes through with a no cost mortgage refinance, the percentage rate of the loan may go up, and it also has the ability to extend the life of their loan. In a tough economic time this is a good deal, if the buyer can afford the costs they will have to pay and it will help them out in the long run. All of these programs should not be entered into lightly, they deserve a lot of research and thought.