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Old 07-27-2010, 01:46 PM
 
Location: NC
656 posts, read 1,059,877 times
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Is there something like no refinancing fee? One of my friend said he had refinanced, but did not pay any refinancing fee ?

I thought there is always the 1% of home value - origination fee.

There should be some catch here, can someone please explain.

Thanks.
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Old 07-27-2010, 02:19 PM
 
Location: Laguna Niguel, CA
768 posts, read 4,135,246 times
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You can get your closing costs reduced/paid for by the mortgage broker or lender by accepting an interest rate slightly higher than the interest rate you would get if you were to pay your own closing costs. This is because at a higher interest rate, the mortgage lender or broker makes more commission from the bank and they can use the additional commission to pay your closing costs. The difference in interest rate usually is .25% up to .50% depending on your loan amount and the amount of closing costs.
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Old 07-27-2010, 03:41 PM
 
Location: NC
656 posts, read 1,059,877 times
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So, if my interest rate is 5.5% and the current interest rate is 4.5%, I can (possibly) reduce my rate to 4.75 with no refinancing fee ?

Is that right ?

Thanks.
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Old 07-27-2010, 03:49 PM
 
Location: Austin
7,205 posts, read 19,206,767 times
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I would say that would be true if you're only talking about the loan origination fee. If you're saying your friend paid NO closing costs, that usually means it was added to the loan amount.

For example, if you owed $100,000 (nice round number), and your closing costs were going to be $4000. Instead of paying the $4k at closing, you refinance to a loan of $104,000 instead. People consider that a no-cost, no-fee refi, as they don't count the fact that they're paying for it over 30 years (15 years depending on loan).
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Old 07-27-2010, 03:53 PM
 
Location: Plano, Texas
1,675 posts, read 6,645,621 times
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If you want to pay no costs, you should expect a rate around 5%. But at the end of the day, consumers always pay the closing costs. They either pay them upfront or they pay them over time with the higher interest rate.

If you are keeping your current home for more than 3 years, you should pay the costs and buy the lower rate.. If you are keeping current home less than 3 years, a no cost loan is a great option.
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Old 07-27-2010, 03:56 PM
 
Location: Laguna Niguel, CA
768 posts, read 4,135,246 times
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nc - correct, you would just be responsible for pre-paid interest & any reserves required for the escrow account (if applicable), so the lender or broker pays for the lender fees, title fees, escrow fees and recording fees.

Falconhead you bring up a good point - a lot of lenders have different variations of a "no fee" mortgage. Some lenders will say it only covers their costs, such as underwriting, processing, credit report, etc... some will just say it means you are including everything into the new loan amount vs. paying it out of pocket... and some will actually say it covers all parties fees, which is what I think it should mean. In any "no fee" or "no cost" situation it's always good to get an upfront breakdown of the costs so you can see what portion you'd be responsible for, if any at all.
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Old 07-27-2010, 04:09 PM
 
Location: NC
656 posts, read 1,059,877 times
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Great insights...Thank you all very much.
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Old 07-28-2010, 10:12 AM
 
4,982 posts, read 12,663,358 times
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Quote:
Originally Posted by FalconheadWest View Post
I would say that would be true if you're only talking about the loan origination fee. If you're saying your friend paid NO closing costs, that usually means it was added to the loan amount.

For example, if you owed $100,000 (nice round number), and your closing costs were going to be $4000. Instead of paying the $4k at closing, you refinance to a loan of $104,000 instead. People consider that a no-cost, no-fee refi, as they don't count the fact that they're paying for it over 30 years (15 years depending on loan).
Not correct. I have been doing around half of my refinances (especially 15 & 10 year deals) with $0 closing costs. The costs are built into the rate, not the loan amount.

For example:

15 yr fixed
$200,000 loan amount

3.75% $3,500 closing costs
4.0% $1,500
4.25% $0 closing costs

At 4.25% we would make enough income to cover the costs and our profit.
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Old 07-28-2010, 03:46 PM
 
Location: New York
2,251 posts, read 4,529,464 times
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Nc9 - I refinanced last year to 4.5%. Total fees $965 (including the appraisal).

We went through our existing lender and did a stream line refi.

Good Luck
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