Fortunately, it does! The no closing cost mortgage refinance is in fact real, and it can be done for homeowners who do not wish to pay hundreds of thousands of dollars in fees. However, there is a catch for having no closing cost. Instead of paying those fees, the homeowner will instead have to pay a higher interest rate for as long as the loan is ongoing. Is this a good thing or a bad thing? It depends on the type of loan and how long the homeowner instead to pay it off.
The no closing cost mortgage refinance can pay itself off in a number of ways. First, the closing cost can hit thousands of dollars on average, and not too many people are willing to pay up such a large amount for money that they have to pay back with interest anyway. Without closing cost, the only thing the homeowner has to worry about is the interest rate itself. This is ideal for homeowners who play to spend many years in their home. The interest rates you have to pay will feel insignificant compared to the price of having an established home for years to come.
Not Paying Off
No closing cost mortgage refinance don’t always work out for some people. Some people will end up having to pay a higher interest rate that in total will be worth more than the closing cost. This especially applies to new purchases or refinances on loans that already exist. Within a few years homeowners can break even on the closing cost. The higher interest rate, on the other hand, could cost more over many years. If the homeowner is not planning to live in the house for long, the no closing cost mortgage might cause them to lose money.
What Works Best?
So now that there are pros and cons to having a no closing cost mortgage refinance, what’s the best option for a homeowner? Well there’s no right answer. There’s always going to be different loans that offer different rates. In addition, the types of houses and the reasons for owning a house also factor into whether or not the closing cost matters. At the end of the day it depends entirely upon the homeowner and what he or she is trying to do with the recently purchased house.