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No Closing Cost Refinance Loan

JeffSpieth | Sep 8, 2009 | Views: 195 |

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The no closing cost refinance loan has been growing in popularity over the past few years or so with many homeowners who want to refinance their current mortgage at the lowest possible costs. While many people have gone in thinking that they were getting a better deal by taking out a refinance loan with no closing costs, the reality is that these people are often not reducing their overall costs by a significant margin due to the no closing cost refinance loan’s inability to provide the borrower a cheaper refinance loan when compared to some of the more common refinance loan products that are on the market. This is because the cost savings of this type of no closing cost home refinance loan are often counteracted by the lender’s willingness to boost the interest rate by about a half a point or so in order so that they can recoup the money they lost by paying for the closing costs of the refinance loan. This isn’t happening with all no closing cost home loans, but for the vast majority some kind of interest rate compensation is becoming more and more of a common practice by various lenders, and for this reason you must think twice about following through with this type of refinance loan.

The rise of this kind of refinance loan has been centered around the multi-million dollar marketing campaigns of some of the even most reputable and largest lenders. These marketing campaigns have spawned a tremendous interest from the general population, and have successfully accomplished their primary goal—to get borrowers into the sales offices and websites that can further convince them how this type of refinance can save them money. The no closing cost refinance loan isn’t really any different from a conventional refinance loan besides the fact that the borrower doesn’t have to pay any closing costs, and the underlying structure of the loan is exactly the same as a comparable refinance loan. The truth is that this type of no closing cost home refinance loan is simply a phantom product that can almost never deliver on its promise of yielding cost savings to its borrowers, and the entire interest that has been surrounding this kind of home loan has been attributable to the marketing effort and campaigns that some of these major lenders have invested into creating for this loan product.

Remember that it has become a common practice with this type of loan to offset the closing costs with a higher interest rate, and you must be aware that most lenders will raise your interest rate without informing you at all. This is because you have no real basis for comparison unless you have gotten a quote from another lender, and even then it is difficult to gain a solid comparison of what you could be paying, and what you are being offered. This isn’t happening one hundred percent of the time, but for the majority of these sorts of no closing cost mortgage refinance loans this has become a common practice, and it is something that really needs to be cleaned up before more and more people get convinced that they can save money with these types of loans. Despite the inability of these types of loans to deliver on any kind of real cost savings, people are still going crazy for these types of loans and that should only serve as evidence to the power of the statement “no closing cost”. Closing costs can cost a borrower a significant amount of money after all is said and done, and it is not a surprise that millions of people from across the country have showed interest in these types of no closing cost loans. You probably don’t want to contribute to this growing interest unless you want to get fooled as well, so it is probably a good idea to stay away from the no closing cost refinance loan.

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