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What does zero cost refinancing mean? Is the cost higher than a new mortgage?

by xtang747 from Minter City, Mississippi. Jul 9th 2020 Reply


Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 1,904 contributions

There is no such thing as a zero-cost loan. All loans have costs. Typically, they included Title Company fees, Appraisal, lender fees for Processing, Underwriting and overhead, including the Loan Officer's compensation and the Company's profit. So if you really think about it, who would work for free? A "No-Cost Mortgage" is a marketing Ploy to make you think you are getting a bargain, when in all likelihood you are not. When a lender is telling you they have a "No-Cost Mortgage", what they are NOT telling you is that you are agreeing to pay a higher rate than you would otherwise be entitled to in exchange for the lender getting funds, at closing that will be used to cover the costs associated with the loan. Typically, when you do this, the increased interest you pay to the bank equals the cost of the refinance in somewhere between 36 and 48 months. BUT you are stuck paying that higher rate for the life of the loan, effectively repaying the bank in three years, and twice in six, three times in 9 years, etc.When you refinance, you are actually getting a new mortgage that will pay off the old one. Most ethical lenders will NOT sell you a "NO-Cost Refinance". Instead, they will give you the best rate possible and give you a "No-Out-Of-Pocket" Loan. The difference is that the cost of the loan is rolled into the principal balance and you only pay the costs once. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Licensed in Arizona, California, Georgia, Oregon, and Washington. Need help in other states? We got you covered. NEXA Mortgage is licensed in 46 states ~ www.ApplyYes.com 480-889-9000

Jul 9th 2020
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