Did you know that there are mortgage programs that will allow you to refinance your mortgage and have no closing costs? It’s true! This can help you cut hundreds of dollars off your monthly payments, but what’s more important than the amount of money you save is how much more money you can put toward other things that are important to you, like paying off debt or saving for retirement. So learn about the best mortgage refinance programs with no closing costs and start saving today!
Should you consider refinancing your home?
Now is a great time to refinance your home if you have low interest rates, but it isn’t always worth it. While refinancing has no closing costs, most lenders don’t pay for appraisal fees or broker commissions which could cost you hundreds of dollars. Also, those who expect to move in less than three years should consider staying put since there are likely tax consequences associated with refinancing. In order to figure out whether refinancing is worth it for you, take an inventory of all major life changes (i.e., job transfers, births/deaths) that may happen over that time period before deciding on a refinance.
Is there an advantage in refinancing a good deal?
If you’re not planning on staying in your home for more than a few years, then there probably isn’t much advantage to refinancing. A common misconception is that refinancing means you have a better deal. But it may not mean that at all. It could just be a new way of paying off an existing loan—in which case it’s really just extending out how long you have to pay off debt. If you do refinance and extend out your term, remember to add in all those monthly payments over time into your calculation—especially if you plan on refinancing again once those current terms are up or when interest rates drop down again. Keep these things in mind when deciding whether or not to refinance now or later.
Closing Costs & Points
When you take out a mortgage loan, there are two types of fees that you will pay upfront: points and closing costs. Points are prepaid interest and is a lump sum amount of money to reduce your interest rate. Closing costs include origination fees, title insurance, appraisal fee, attorney fee and document preparation charges. Refinancing your loan might help you save on both points and closing costs at settlement.
Other Advantages of Refinancing
Did you know that there are some significant advantages to refinancing, even if you don’t have substantial equity in your home? Because banks and lenders are so eager to refinance mortgages these days, homeowners who might otherwise not qualify for a new loan can often borrow against their existing home and lower their monthly payments. Let’s say you’re struggling to keep up with your current payment and need $3,000 per month in order to avoid foreclosure. If you were able to refinance for a new 30-year loan at 4 percent interest instead of 6 percent, for example, you could easily save $1,500 per month on mortgage payments – more than enough to help ensure that your house stays in good standing.
Are there disadvantages to refinancing?
Before refinancing, ask yourself if you’re going to take on a bigger loan, and make sure you are prepared for all that comes with it. For instance, you’ll likely have higher monthly payments or a longer repayment period. Refinancing is a big decision—one that shouldn’t be taken lightly. Make sure to talk through your reasons for refinancing with someone who knows about real estate and mortgages. It can be complicated, so don’t do it alone!
What type of home loan should you choose?
First-time homebuyers typically have just two options for their home loan: A fixed-rate 30-year loan or a Federal Housing Administration (FHA) loan. However, if you’re refinancing, you might have more choices, including: Refinancing with cash out: With this option, you refinance your current mortgage and take out more money than what is needed to pay off your original debt. You can then use that money to buy a car or remodel a kitchen. Refinancing into an adjustable rate mortgage (ARM): An ARM allows you to select a low interest rate at first but then could rise in years ahead based on changes in an index of rates and other economic factors such as inflation and unemployment rates.
Should you use private money or bank financing?
When you’re considering refinancing your home, one of the first questions that comes up is whether to use private money or a bank loan. The answer can depend on how comfortable you are going outside of a bank for financing and on where you stand in terms of credit score and down payment requirements. If you want to use private money but can’t because it doesn’t qualify, remember there are lenders out there who will work around such obstacles by increasing your down payment or funding even if a credit check shows you have bad credit. You might also consider a no cash-out refinance, which allows you to take money out without destroying your loan-to-value ratio.
Should you consolidate your debt with a new home loan?
A lot of people who’ve taken out a home loan decide they’d like to consolidate all their debt by refinancing into a new loan. This can be helpful in some cases, but there are times when it might not be worth it. As an example, if you know you’re going to take out another loan in six months or so and you think refinancing now will help you secure better terms for that future debt, then doing so makes sense. On the other hand, if you know that taking on new debt isn’t something you want to do right now—regardless of how low interest rates go—then paying off current debt before refinancing might make more sense.
Should you do 1031 Exchange to defer capital gains tax?
If you’re a US taxpayer, you must pay capital gains tax on profits from assets when you sell them. When it comes to real estate, many investors choose to defer paying capital gains tax by using 1031 exchanges. The exchange allows them to reinvest proceeds from a sale of investment property into new properties without being taxed. However, some may avoid realizing profits for decades – and running afoul of IRS rules in so doing – because they don’t realize how long it takes to complete an exchange or what paperwork must be kept track of.
If you have been in your home for several years and plan to stay there for a while, it may be worth refinancing into a better deal. Refinancing can offer you lower monthly payments and lower interest rates, which will save you money. Another benefit is that refinancing your mortgage into a new loan without closing costs could save you thousands of dollars. Call today to find out more about your refinance options!