Refi
I received an offer from my bank to refinance (I’ve owned the home less than two years). It says no closing costs, no application fees or appraisal costs and I can close at home. So what is in it for them? I hate to sound paranoid, but I guess I am…
I received an offer from my bank to refinance (I’ve owned the home less than two years). It says no closing costs, no application fees or appraisal costs and I can close at home. So what is in it for them? I hate to sound paranoid, but I guess I am…
I posted on no closing cost refinances a few days ago.
Those fees are still going to be paid. Your interest rate will be higher by accepting the “no closing cost” option. The bank will make a higher margin on the higher rate allowing them to pay your closing cost with the excess premium/commission that they make.
Check to make sure what closing costs are being paid. A lot of these no closing cost loans don’t cover title insurance or additional taxes. The devil is in the details.
These refi’s make sense to a homeowner that may not be in the house a long time but still wants to take advantage of lower rates. If you are going to be in the house indefinitely they almost always are a bad idea as you will be accepting a higher rate and essentially financing those closing costs that you didn’t think you would be paying. You will end of paying them over and over again resulting in thousands of more interest payments than the 4-5k in closing costs.
Adam Dahill
WCS LENDING
adahill@wcslending.com
They will reappraise the value of your house. New value will look better on their balance sheet.
Also do not get distrusted by the reduced monthly payment:
you will have to make more payment after refinancing. For example if you had 25 years left on your old loan. Now you will have to pay for 30 years for new loan even though the smaller monthly payment. It is hard to tell which is better. You can calculate NPV for each and see how much value it will add, but NPV does not work for life of citizens as it does for businesses.
Things that sound too good to be true usually are. There has to be something in it for the bank, like a hefty commission. Or, the bank maybe trying to pad their refi/loan modification statistics ahead of Elizabeth Warren putting the screws on. They really don’t want to modify bad loans, but they’d love to pad the stats by modifying performing loans.
Is it a refi or a loan modification? Citibank contacted me out of the blue a few months ago as part of a promotion, and for $375 I was able to start a 10 year loan over at a savings of $500 per month. I’m trying to work with the company that holds the mortgage on my other property to do something similar. Either way, I was sure I wouldn’t get approved or that they’d sneak some crazy fees in there but nope. It was exactly what they said it was. Hope it works out for you too.
Can avoid that if you refinance with same bank.
This has nothing to do with the bank, but won’t the city collect a hefty fee? I know when we bought our house we had to pay the city more than $10,000. I think the same applies to refi.