Competition is tough even in banks and lending institutions which is why no closing cost refinance loans is an enticing promo for customers. This loan scheme seems to convey a better option for those who are in need to refinance their mortgage. No closing cost refinance offers a mortgage program that assures you of no fees or any outright out-of-pocket expenses whenever you refinance your existing mortgage. While this option is present before, it can somehow attract customers to give it a shot.
In this loan transaction, the lender or broker is the one who will shoulder the settlements costs, including fees for processing, underwriting, appraisal, title/escrow and others, hence making possible for the customer to pay nothing as he avails of the refinancing loan. So in this case, while you paid no cost as you avail of the loan, the bank or lender is sure to add the closing costs on top of your loan amount and can expect for higher rates for your amortization.
The truth is the bank or lender will make up for the absence of fees. If you are keen, you will observe that the interest rate will increase and the payment will be adjusted with add-on amount. On the initial look on the offer, it is an advantage especially when you are getting this refinancing loan to reconstruct your debt and you have either no cash to pay-out closing fees, then this loan scheme is a desirable option. You can also save cash and set it aside for other urgent needs.
For most people who are not well versed in this loaning process and time is tight for them to decide and examine closely their options, then they have no choice but to agree with no closing cost refinance mortgage. Depending also on the term of the loan and the economic situation at the time of availing it, there is a chance also that this can be a better option.
On the other hand, if you made a deal at the wrong time, say for example the inflation rate is high, the interest rate that you will be paying is high as well. And since the closing cost will be accumulated together with the loan amount, you will be paying much and even realizing that the closing cost paid is doubled. People will also tend to agree with the no closing cost refinance mortgage without recognizing their ability to pay for the amortization in the long run.
So before you finally decide on taking up refinancing loans, you should weigh down the pros and cons of your decision. Do not be blinded by mere gimmicks or attractions which will trap you later and instead of getting the right deal, you just have to live with the debt that is twice the burden. Take time to shop around and compare interest rates and other fees. Ask educated advice from experts if you need to be clarified on things. Always contemplate the advantage and disadvantage of availing a no closing cost refinance loan.
Marie Castelle is a free lance writer and editor who loves to educate people in many different topics. She writes on topics about refinancing your home, refinancing home mortgages, refinancing rates and many more.