No Cost Refinance Fantasy

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The no cost refinance idea perpetuated by advertisers like Lenox Financial and Ditech that no cost refinances even exist, is just mean. This no cost refinance fantasy will be put to rest here and now.

I estimate half of the people I have discussed mortgage refinancing with over the last year have wanted to know more about the no closing cost refinance. They admitted they saw on TV or heard on the radio advertisements promoting refinance programs with no closing costs.

No Cost Refinance Loans Are a Myth!

This idea that a mortgage can be done without closing costs is simply an advertising gimmick. Is that really so hard to believe?

I hope not…because it’s the God’s Honest Truth.

Let me clear this up once and for all…

There are only 3 ways mortgage closing costs get paid on a refinance:

1. Borrower Pays by bringing a check to the closing. (not very popular)

2. Borrower Pays by using yield spread premium to pay them. Taking a higher rate creates money to pay costs. The typical no cost refinance method uses this means to hoodwink consumers into thinking their loan is free of costs. Since when does paying a higher monthly payment for the length of the loan translate into “no cost”? Only in the marketing minds of banks and brokers would this ring true. Don’t be tricked.

3. Borrower Pays by rolling them into your loan. In other words, financing the costs into the new loan. For example, if the current mortgage payoff is $200,000 and your closing costs are $5,000, your new loan amount when you refinance is $205,000.

I want you to notice something about all 3 of the closing cost payment methods above:

You Pay Regardless of Method!

Now remember, there are always costs for a refinance and YOU always pay one way or the other! It is a new loan….no one can do a refinance for free. Do NOT be fooled by the BS out there that companies actually do a no cost refinance.

Translation: The rate for a no cost refinance is higher than current mortgage rates. That high rate produces money used to pay the costs of the refinance and then line their pockets with who knows how much. They pay your costs with a small portion of the money created with YSP then take the rest for themselves.

Also, don’t be one of those people who will step over a nickel to pick up a penny. We have been trained in this country to think closing costs are bad.

Remember, closing costs are in every refinance. There is no getting around it. Anyone attempting to get your business claiming the opposite is playing word games and by definition, a liar.

Good Luck!