Rusty A. Payton, Broker
1225 W Morse
Chicago, Illinois 60626
I love the term no closing cost to the consumer by paying a higher rate or â€œsimplyâ€ rolling the costs into the new loan. Regardless of how you look at it the consumer will be paying for the closing costs of the refinance at closing or financing the closing cost over the entire course of the loan.
Each consumer has different needs and situations when it comes to refinancing. Some consumers simply will not have the upfront monies to pay the fees to refinance their homes and they are refinancing to save themselves badly needed dollars they need back in their pocket as quickly as possible paying the higher rate or financing the closing cost in the loan my be that consumers best option.
Consumers should shop around with a couple of mortgage lenders and determine the best route for them.
Quality Mortgage Lending
The real variances come from what the mortgage company is charging. In the last few years, we've seen most companies in the same ballpark, unless the loan has extenuating circumstances. Paying discount points is usually up to the borrower. Sometimes it's mandatory in order to make a deal work (i.e. low credit score / high loan-to-value). I would only suggest this option if the dollar and interest savings over time is enough to justify the cost of the discount point(s). More often than not, if the person isn't going to be staying in the home for longer than 10 years, it usually isn't.
I usually use any premium in the rate to pay for the borrowers costs on a refinance. Again, the rate might be an 1/8th higher, but it saves the customer money, while the increase in payment on that 1/8th of a point is minimal, and so is the interest difference. And they get to write off more on their taxes too, which should wash out any monthly payment increase.
I give all my clients options with costs and without costs and almost all of them choose the no (or low) cost option.
I hope this helps. Please contact me with any questions.
Senior Loan Officer - NMLS #574681
Chicago Financial Services
Most lenders will be able to offer this option but your rate may be higher.
Senior VP of Mortgage Lending