No Cost Mortgage Refinance: Is It Worth The Rate?
By getting a no cost mortgage refinance you can avoid such fees as broker fees, title insurance, escrow fees, recording fees, appraisal fees and more, although it won’t get you out of paying interest, insurance and of course taxes.
So, is it worth it? If you are holding this property for a short period of time perhaps because you want to flip the home or any other reason - yes. The best way to find out is by seeing how much you would pay with the no cost mortgage refinance loan monthly for the planned duration of the loan and compare it to the cost of getting a loan with closing fees & add in the fees. Where does your break even point lie? 5 years? 6? If you plan on holding the home for less time than this it will be worth it to do.
On the other hand if this is going to be your home for a while and you have some money on the side you can afford to use to pay for the closing costs it is recommended you do pay the closing costs because that small interest premium really adds up quickly, and by year 10 will weigh heavily. With most mortgages being 15 – 30 years if this is more than a temporary home, pay the closing costs. Paying now will save you much later.
There are many mortgage calculators online which can help you simply find your breakeven point and let you know whether a no fee mortgage is worth it. Another small tidbit of advise is if you find a no closing cost mortgage will be worth it also look at adjustable rate mortgages known as arms. These will also raise your interest rate and risk rating but if you plan on selling quickly may be worth it. On the other hand if this article has convinced you to pay the fee to save money later it is strongly recommended to also only shop for fixed interest rate mortgages
Good luck and happy mortgage hunting!