No Closing Costs and refinancing closing costs

If you have been shopping for mortgage refinance recently, you probably have encountered companies who claim to offer mortgage loans with no closing costs. Sounds like an awesome deal right? Unfortunately, life rarely offers great things for free. And certainly not from mortgage issuers. The only fees from closing costs that are actually waived are lender's fees, whereas title fees, insurance, and other costs are still in tact.These lenders use the "no closing cost" clause as an incentive to engage in a new home loan or to refinance an old mortgage at a higher rate for a longer period of time, and  easily earning the normal lender's closing costs portion back- in other words, the interest rate will cover your refinancing closing costs.

Mortage lenders who either waive their fees or drastically decrease closing costs from industry norms often charge a higher interest rate on the newly-issued mortgage. Sometimes the lender also offers a third option for the buyer to change the closing costs into a loan by adding the cost to the existing mortgage, and charging the interest rate of the mortgage on top of the closing costs.

Benefits of "No Closing Costs"

Having no closing costs can be beneficial if and only if the buyer is planning to repay the loan in a short period of time, thus rendering the higher interest rates almost inconsequential. Better loan companies often offer the buyer a choice of having either a high interest rate and little to no closing costs, or a lower interest rate and some closing costs. Therefore, it is up to you (and your lender, if you ask for help) to decide which plan is the best for your current situation.

Reducing closing costs

While there is no real way to have no closing costs altogether, there are ways to avoid being overcharged and/or paying too much on costs that you can control.

Finding the Perfect Contract

You can use local as well as online services from different banks to find the contract that best fits your needs. Contact your current mortgage company and make sure they can match the new loan rates that you have been offered. Negotiation is key, and most mortgage lenders are willing to lower their rates to a point to win your business. Usually, you can find a better loan if you have a good credit score.

For more negotiation help on closing costs, click visit our section on Closing Costs Refinancing Negotiations.