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Are there really any no cost refinances available?

How can one lender offer no cost and the other charge fees? How do they make money? Is this a gimmick? by Farang_536_457 from Redwood City, California. Jan 20th 2012 Reply


William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,726 contributions

The cost of money is about the same for every lender. Some lenders charge more and some less. But in either case, the lender will make their money.. Either in up front points or via a higher rate. When you see a "No Cost" loan being offered, you will pay a higher rate than if you paid your costs. In essence, you're financing your costs via a higher rate. This isn't always bad thing.. You can write off interest on your mortgage, however you cannot write off all of your costs associated with a refinance. When it comes to refinancing, my suggestion is to always go with the "No cost" type of refinance. By doing this, then any savings you get become 100% savings... if you pay costs, you have to put your monthly savings against your total costs and determine how many months of savings it will take to "Pay Back" your costs and break you to even. WilliamAcres.com

Jan 20th 2012
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Don Maher (don@ucloan.net)
#373 ranked lender in California - 30 contributions

You need to review a total cost analysis comparing no cost loans vs. loans with 3rd party fees. Here is a sample of one that I provide for my clients. http://www.donmaher.com/docs/analysis.pdf Feel free call for a free personalized analysis. Don Maher (800) 736-0565

Jan 20th 2012
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Ryan Romero (REFIryan)
#453 ranked lender in California - 27 contributions

As lender and broker we get a money for a higher rate agreed upon by the borrower. If the money exceeds the cost of doing the loan and still with in a profit margin we will do the loan for no closing cost. The lowest rate at the time is not always the best costing more money rolled into the loan. (higher fees) The break even point is the amount of months it will take for recouping your cost of the loan. Over the time with not refinancing ever in the 15-30 year range is the lowest rate is the best over time but most people move or refinance every 5-7 years. Making the no or low closing cost better for 95% of people. 888 308 7775 or 619 884 9116 www.rmfundinggroup.com

Jan 20th 2012
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Dan Paladin (dpaladin)
#1 ranked lender in California - 587 contributions

Yes..no cost is available...first..no cost typically means the lender is paying for your NON-RECURRING closing costs such as all lender fees, appraisal, title, escrow and those related fees. No cost does NOT include funds for taxes, insurance or any prepaid interest.Rate will typically be higher to absorb that cost. A cost analysis comparing full cost with no cost will help you determine which is best for you.Feel free to contact me for a not obligation analysis. 877-369-4319

Jan 20th 2012
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 1,823 contributions

There are many reasons you would want to choose increased rate, one of which is an intention to stay in the home This is where you would want to talk to a mortgage professional who can work through the various options to help you decide. Contact a local Mortgage Banker/Broker, rather than one of the big banks to help you decide which makes the most sense. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She will have access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you (like which method of paying for fees makes the best sense for your situation. Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

Jan 20th 2012
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Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 1,823 contributions

THIS IS A CORRECTED REPLY. The first part of my answer did not publish.The short answer is yes, a no cost loan is a gimmick. All loans have costs, because no one works for free. Closing costs can be paid for one of four ways on a purchase or three ways on a refinance. On a refinance, the fees are paid "out of pocket" by the borrower, "added to the loan balance" and paid over time by the borrower, or, you agree to accept a higher interest rate and the present cash value of that higher rate, is paid to the lender, who uses them to pay the costs, and yes, you end up paying the costs over time through higher interest. This is what is usually called a "no cost" loan. On a purchase, the fourth option is to have the seller pay them, but then here too they are paid by the buyer in the form of a higher purchase price. There are many reasons you would want to choose increased rate, one of which is an intention to stay in the home a long time. This is where you would want to talk to a mortgage professional who can work through the various options to help you decide. Contact a local Mortgage Banker/Broker, rather than one of the big banks to help you decide which makes the most sense. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She will have access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you (like which method of paying for fees makes the best sense for your situation. Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

Jan 20th 2012
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Axel Logan (mayfunds)
#564 ranked lender in California - 7 contributions

Hi,We facilitate all types of Collateral and Non-collateral loans such as: Real Estate Take-out Loan, Real Estate Mortgage Loan, Personal loan, Car Loan, Car Loan Mortgage without Taking your Car, Non-Collateral Business Loan, Non-Collateral Corporate Loan, OFW Loan, Seaman's Loan, Doctor's Loan, Salary Loan, Truck Loan, Motorcycle and Tricycle Loan, etc. We can assist you to get the lowest interest rate and the fastest loan release within few hours. For assistance or for more information, please contact: mayfundsinc@live.com

Jan 20th 2012
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Blake Kleckner (BlakeK)
#388 ranked lender in California - 258 contributions

The simple answer is yes and no. To get a no cost loan the interest rate (IR) on it will be somewhat higher than a loan with costs. Typically loan costs are in the $3,000 range. These can be paid by a credit back to you for the interest rate chosen. For instance, currently you can get a 30-year fixed rate loan possibly with an IR as low as low as 3.5% but you would have to pay all closing costs and the lender's loan origination fee, which can range from 1% to 3% depending upon the lender and the deal you can negotiate. Assuming you can get it at 1%, your total cost for, say, a $300K loan would be $6K $3,000 + $3,000), which can be added to the loan depending upon your home's loan-to-value ratio. On the other hand, you could get the same loan at, possibly, 3.875% without costs depending upon certain qualifying factors. At 3.5%, the $300K would result in a monthly payment of $1,374, and at 3.875%, $1,411. To determine if it makes sense to pay $6K for this loan versus zero, simpley divide the $6K by the difference in the above payments, or $37, and your answer will be 162, which is the number of months (13.5 years) it will take you to recoup the $6K cost if you decided to opt for the 3.5% IR. If you're planning on staying in your home for at least that long, then perhaps the 3.5% IR makes sense. If not, you would be best served with a no cost loan. Give me a call 16/7, or email me, and I'll be happy to walk you through the process. To learn more about me and our mortgage brokerage, click on my picture. When the next page pops up, click on "Website" and you will be redirected to ours. We work exclusively in CA and get loans done fast, typically in less than 30 days, at low interest rates and costs. Representing 39 quality lenders that offer more than 1,000 loan programs, we definitely have something for everybody.

Jan 21st 2012
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