How are you finding "no cost" refis?

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Texanbybirth
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How are you finding "no cost" refis?

Post by Texanbybirth » Sat Aug 17, 2019 12:47 pm

We're strongly considering going from a 30y mortgage (4y in) to a 15y, rate would go down from 4.125% to 3.125%. (We're not interested in a new 30-yr mortgage.) I see some people posting about "no-cost refis", but I can't find anything. I'd be willing to post my zip code if someone wants to find one for me. Here's the best quote we've gotten so far:

Closing Costs -
Lender/Origination Fee: $895
Credit Report: $80
Flood Cert: $10
Appraisal: $570
Document Prep Fee $210
Title Closing Fee, title fees estimated $1962
Escrow TBD

I've balked at the credit report, flood cert, and doc prep fee. I've also asked about the seemingly high appraisal fee (I thought they were $300-$400), but there's still the origination fee and Title Fees. (How do I even go about finding the title fees? Do I just call up a title company and say I want to use them to refi? I mean, we already live here so I'm not sure how much title work there is to do.)

[A nearby zip code would be 75080. House value $375k, loan amt $208k, excellent credit.]

Is this a state/city specific thing?

Thanks for your help!
Old Tom Bombadil is a merry fellow, | Bright blue his jacket is, and his boots are yellow. | None has ever caught him yet, for Tom, he is the master: | His songs are stronger songs, and his feet are faster.

MathWizard
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Re: How are you finding "no cost" refis?

Post by MathWizard » Sat Aug 17, 2019 1:04 pm

Texanbybirth wrote:
Sat Aug 17, 2019 12:47 pm
We're strongly considering going from a 30y mortgage (4y in) to a 15y, rate would go down from 4.125% to 3.125%. (We're not interested in a new 30-yr mortgage.) I see some people posting about "no-cost refis", but I can't find anything. I'd be willing to post my zip code if someone wants to find one for me. Here's the best quote we've gotten so far:

Closing Costs -
Lender/Origination Fee: $895
Credit Report: $80
Flood Cert: $10
Appraisal: $570
Document Prep Fee $210
Title Closing Fee, title fees estimated $1962
Escrow TBD

I've balked at the credit report, flood cert, and doc prep fee. I've also asked about the seemingly high appraisal fee (I thought they were $300-$400), but there's still the origination fee and Title Fees. (How do I even go about finding the title fees? Do I just call up a title company and say I want to use them to refi? I mean, we already live here so I'm not sure how much title work there is to do.)

[A nearby zip code would be 75080. House value $375k, loan amt $208k, excellent credit.]

Is this a state/city specific thing?

Thanks for your help!
We never had a no-cost refi. My guess is that people call it that when they roll the closing costs into the new loan. (We've done that to
get a better interest rate.) In your case, if you just roll the closing costs in, the 1% drop in interest is going to pay for the closing costs in one year.

We did get a no-cost 7 year fixed rate Home Equity Loan which was essentially a refi for us. That was just a Credit Union trying to drum up business.
You had to have excellent credit, and low LTV. I believe you had to be under 60% LTV, and 740+ rating.

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9-5 Suited
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Re: How are you finding "no cost" refis?

Post by 9-5 Suited » Sat Aug 17, 2019 1:04 pm

We have done one “no cost” refi. Keep in mind it is actually very expensive despite the name. My interest rate was 0.125% higher than it would have been had I paid the closing costs. Just ask the lender what rate they will charge you if they pay the closing costs.

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Texanbybirth
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Re: How are you finding "no cost" refis?

Post by Texanbybirth » Sat Aug 17, 2019 1:07 pm

Thanks MathWizard, that makes more sense.

I'm fine with bringing some cash to the table or rolling it up into the loan. I don't have a huge preference. I've worked with the MtgProfessor website calculators to closely evaluate the breakeven time on the new loan, and it's well within our current plans. We actually have no plans of moving ever, but of course that's not guaranteed. (I don't like getting nickel-and-dimed on "fees" like credit reports and the like, so I might fight back on those.)

:beer
Old Tom Bombadil is a merry fellow, | Bright blue his jacket is, and his boots are yellow. | None has ever caught him yet, for Tom, he is the master: | His songs are stronger songs, and his feet are faster.

SouthernFIRE
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Re: How are you finding "no cost" refis?

Post by SouthernFIRE » Sat Aug 17, 2019 1:07 pm

In my experience, all lenders will offer a “no cost” option. You are simply exchanging closing costs for a higher rate. If the standard rate is 3.5% with ordinary closing costs, there is an amount that the lender will credit you towards closing costs if you accept a higher rate, say 3.75%.

Bogle_Bro
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Re: How are you finding "no cost" refis?

Post by Bogle_Bro » Sat Aug 17, 2019 5:12 pm

You can take a higher rate to get lender credits to cover third party fees.

A single refinance transaction involves several professional services being provided by several professionals, and everyone needs to eat.

The title work costs about as much as if you were purchasing the house for the first time. The title work done previously is irrelevant to the new lender and title company because both parties are assuming brand new risk from scratch.

There needs to be a new title search, new title insurance policy, and new recording to protect all parties interests. Who knows if the prior title company missed something previously, or if you've had judgments or liens added to the property since you bought it?

In the end, you are paying less than 1% of the current balance one time to save 1% of the balance every year after that. That's a great deal and a no brainer. I wouldn't worry too much about a few dollars when your breakeven is under a year....

Posted from my phone, please excuse typos

Jags4186
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Re: How are you finding "no cost" refis?

Post by Jags4186 » Sat Aug 17, 2019 5:22 pm

No cost refis are done by taking negative points. If your rate would have been 4% you take a rate of 4.125%.

You would go this route if you’re in a declining interest rate environment and plan on doing multiple refinances on the way down. You’d also do this if you were not going to keep the lob that long.

If you plan on taking a mortgage and keeping it for 30 years it usually doesn’t make sense to go this route.

brushwood
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Re: How are you finding "no cost" refis?

Post by brushwood » Sat Aug 17, 2019 6:12 pm

There are plenty of places to rate shop but Amerisave is competitive and you can get a rate quote easily on their website. You'll have several different options on how many (negative) points and what the closing costs net out to for the different interest rates.

Big Dog
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Re: How are you finding "no cost" refis?

Post by Big Dog » Sat Aug 17, 2019 6:23 pm

9-5 Suited wrote:
Sat Aug 17, 2019 1:04 pm
We have done one “no cost” refi. Keep in mind it is actually very expensive despite the name. My interest rate was 0.125% higher than it would have been had I paid the closing costs. Just ask the lender what rate they will charge you if they pay the closing costs.
They are only 'very expensive' if you keep the loan for a long time, making the minimum payment. Most people don't. For example, teh OP is only 4 years into current mortgage. (Personally, I am in a similar situation, as I re-financed four years ago, a no-cost refi, btw. If rates drop any further than the are now, I'll refi again.)

Even if you plan on the house being your 'forever home', stuff happens; plans change. Jobs change. Rates drop.

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9-5 Suited
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Re: How are you finding "no cost" refis?

Post by 9-5 Suited » Sun Aug 18, 2019 9:24 am

Big Dog wrote:
Sat Aug 17, 2019 6:23 pm
9-5 Suited wrote:
Sat Aug 17, 2019 1:04 pm
We have done one “no cost” refi. Keep in mind it is actually very expensive despite the name. My interest rate was 0.125% higher than it would have been had I paid the closing costs. Just ask the lender what rate they will charge you if they pay the closing costs.
They are only 'very expensive' if you keep the loan for a long time, making the minimum payment. Most people don't. For example, teh OP is only 4 years into current mortgage. (Personally, I am in a similar situation, as I re-financed four years ago, a no-cost refi, btw. If rates drop any further than the are now, I'll refi again.)

Even if you plan on the house being your 'forever home', stuff happens; plans change. Jobs change. Rates drop.
Good addendum, which is why we chose the no cost route. Just wanted to make sure it was clear that “no cost” didn’t necessarily mean free.

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F150HD
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Re: How are you finding "no cost" refis?

Post by F150HD » Sun Aug 18, 2019 9:45 am

MathWizard wrote:
Sat Aug 17, 2019 1:04 pm
We never had a no-cost refi. My guess is that people call it that when they roll the closing costs into the new loan...
^^^^ this is my understanding. You still pay for it, just not up front out of pocket.
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Re: How are you finding "no cost" refis?

Post by Jack FFR1846 » Sun Aug 18, 2019 9:54 am

MathWizard wrote:
Sat Aug 17, 2019 1:04 pm

We never had a no-cost refi. My guess is that people call it that when they roll the closing costs into the new loan.
Nope.

We did 3 no cost refi's, but this was years ago. Nothing rolled in, no costs paid by us somehow hidden. The way they work is that we pay only the appraisal fee up front and that is refunded to us at closing. That protects the bank in case the appraisal comes back low and you don't go through with the loan. The % rate and APR will be the same. That's how you find them. The APR will be much higher than if you pay bribes to the bank.....I mean points and costs. Find a mortgage broker who works with lots of mortgage provider and tell them that you want a no cost mortgage. I will warn you that you might not find a rate lower than what you currently have for your 30 in a no cost 15. It's certainly worth looking into, but I would not expect anything in the 3's.
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honduranhurricane
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Re: How are you finding "no cost" refis?

Post by honduranhurricane » Sun Aug 18, 2019 8:30 pm

I have found no/low cost refi's on zillow. Done it several times and got the rate that matched the lowest I found anywhere else. Its been a few years since I refi'd but would may consider doing it again if rates drop low enough.

sschoe2
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Re: How are you finding "no cost" refis?

Post by sschoe2 » Mon Aug 19, 2019 7:26 am

What if you don't have that many years or much money left on the loan?

I bought a house last October for $257k with 20% down but also put my portion of my mother's house into the 15 year mortgage so it is down to $138k and is on schedule to be paid off in 9 or 10 years (probably less if I pay extra rather than put money in taxable).

The rate is 4.25. I am considering refinancing if rates keep going down but am balking at paying $4k in closing costs.

SRenaeP
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Re: How are you finding "no cost" refis?

Post by SRenaeP » Mon Aug 19, 2019 7:39 am

sschoe2 wrote:
Mon Aug 19, 2019 7:26 am
What if you don't have that many years or much money left on the loan?

I bought a house last October for $257k with 20% down but also put my portion of my mother's house into the 15 year mortgage so it is down to $138k and is on schedule to be paid off in 9 or 10 years (probably less if I pay extra rather than put money in taxable).

The rate is 4.25. I am considering refinancing if rates keep going down but am balking at paying $4k in closing costs.
Check AimLoan and Third Federal. I've found them both to be very reasonable re closing costs and quite competitive on interest rate.

BackOfTheNet
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Re: How are you finding "no cost" refis?

Post by BackOfTheNet » Mon Aug 19, 2019 4:01 pm

Jack FFR1846 wrote:
Sun Aug 18, 2019 9:54 am
MathWizard wrote:
Sat Aug 17, 2019 1:04 pm

We never had a no-cost refi. My guess is that people call it that when they roll the closing costs into the new loan.
I will warn you that you might not find a rate lower than what you currently have for your 30 in a no cost 15. It's certainly worth looking into, but I would not expect anything in the 3's.
I locked a 15 year fixed at 3.25% with a $4,900 lender credit at the beginning of August. I don't know if rates have gone up since then but I bet you would still be in the 3's.

Northern Flicker
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Re: How are you finding "no cost" refis?

Post by Northern Flicker » Mon Aug 19, 2019 4:08 pm

Wrapping closing costs is just financing the closing costs. This is paying the loan closing costs with additional loan principal and interest over time. You also can buy the closing costs down to zero by accepting a higher interest rate. This is paying the closing costs just with loan interest over time. There is not actually such a thing as a no-cost refi.

Any reputable mortgage originator should support all three methods of paying closing costs with their loan products (the 3rd being brining the closing costs as cash to closing). Which method is best depends on how long you hold the loan.

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onthecusp
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Re: How are you finding "no cost" refis?

Post by onthecusp » Mon Aug 19, 2019 5:44 pm

I've found them with a mortgage broker or by asking Citi, Wells Fargo, local credit union.

To me financing the closing costs make comparison hard, but I understand it could make sense for someone with little cash available.

My default for comparison is a low cost (pay no points) loan so the fees are probably around 500-1000.

Buying the closing costs by accepting a higher rate makes sense to me if I intend to refi again, or move soon. As long as you get a lower rate than you have now, and the balance didn't go up in the refi, it is almost free money except for the rather large hassle factor. Since many people move within 5 years the break even point compared to the low cost version is probably around 3 years but that probably varies all over the map.

dcw213
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Re: How are you finding "no cost" refis?

Post by dcw213 » Mon Aug 19, 2019 6:15 pm

As others have pointed out, there is no such thing in the pure sense of the word, as you must take an above average interest rate to pay no costs. Operationally, the lender gives you a credit to offset costs and then they generally can make more money when they sell the higher rate loan on the secondary market. However, for a borrower who has an interest rate notably above market (50 bps or so), doing a refi in this manner makes a ton of sense. Reduce your rate with little to no out of pocket expenses. It might not be the best rate available, but no harm doing it if the borrower doesn’t mind going through the process. I just got my first mortgage and decided to take a higher rate for credits to offset costs. I’m glad I did as I may refi soon given the recent interest rate activity.

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whodidntante
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Re: How are you finding "no cost" refis?

Post by whodidntante » Mon Aug 19, 2019 8:26 pm

Any lender that hires competent people then empowers them should be able to do this. Instead of laying points you are taking points. If you pay off early, you win.

Northern Flicker
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Re: How are you finding "no cost" refis?

Post by Northern Flicker » Tue Aug 20, 2019 1:31 am

The term used for calculating the tradeoff between closing costs and interest rate is the average time people hold mortgages estimated st the time of the refi. This varies from 7-10 years generally. Winning by paying off early (which might be another refi or sale of the home) means paying off before the end of the term used in the calculation, not before the very last payment of the mortgage.

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