For most consumers, the largest debt they will carry will be their home mortgage. For that reason, even small changes in an interest rate can make a large impact over the course of a loan.
Just like compound interest can be used to build wealth over the long term, the reverse is also true in that paying higher than necessary interest rates can erode wealth creation.
When it comes to looking into refinancing a home loan however, there is often a fee that comes along with the refinance, that can therefore negate some of the benefit of the refinance.
However, what if you could refinance and do so without paying fee out of pocket and without adding any cost to your existing home loan? That would put you into a position to reap the benefits of a lower interest rate, while also not putting yourself further behind in the ultimate payoff of your mortgage.
In this article, we will discuss the various options available for a no cost refinance, whether you currently have a Conventional, FHA or VA loan.
No Cost - Conventional Loan Refinance
Conventional loan no cost refinances are completed by lenders providing a credit for all costs associated with the refinance transaction. This is done by providing a slightly higher interest rate to cover all fees. Often times that higher interest rate is equal to just .125% to .25% higher than the best available market interest rate.
You will need to provide new income documentation to complete this type or refinance, but you may or may not need to have an appraisal done on your property to have this type of refinance completed.
If a lender is willing to do this and you can reduce your interest rate by at least .50%, then a Conventional no cost refinance could make sense for you.
FHA loans have the FHA streamline refinance program, which is a specialized program designed for those with existing FHA mortgages to refinance without an appraisal and without providing new income documentation.
On an FHA streamline, lenders should be able to offer a no cost refinance without an adjustment to a higher interest rate.
In order to be eligible for an FHA streamline refinance, your existing interest rate plus monthly mortgage insurance, must decrease by at least .50%.
VA loans have the VA Irrrl streamline refinance program and are perhaps the most advantageous of the no cost loan programs. The VA Irrrl program does not require an appraisal or updated income documentation for the approval process.
Lenders should be able to cover all costs for this transaction, while providing a current market interest rate VA loan.
A VA Irrrl streamline refinance does have a .50% funding fee associated with it, for Veterans not in receipt of VA disability. However, the VA streamline can make sense, with even just a .25% drop in an interest rate.
These are just some of many options to refinance a home loan without closing costs. As always, it makes sense to speak to a licensed lender, such as Strategic Mortgage to fully qualify and see what home loan options are available to meet your specific situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: firstname.lastname@example.org or online at www.strategicmtgaz.com
Vasilios Kamboukos – NMLS#160440