Mortgage Refinancing at No Cost

by Betsy in Ann Arbor and by Terrence in Stamm

Beware of mortgage refinancing at no cost! In spite of copious regulations, Buyer Beware remains the best advice for homeowners wanting to refinance. This is why I author Ask Kate at Get-Your-Best-Mortgage-Rate.com! My goal is to empower you to get the best rates at the least cost.



Keep reading about... Betsy, a homeowner for 36 years, who questions lenders offering mortgage refinancing at no cost and Terrance who wants to know how to negotiate lower mortgage fees.

Question 1: Possible Home Mortgage Refinance?

By Betsy from Ann Arbor, Michigan

Kate, I am considering refinancing my home which I have lived in for 36 years. I have had contact with two different mortgage personnel, both via the internet: Amerisave, and First Federal Bank of Kansas City.

Both are offering a 30-year fixed refinance, with no cost to me except for appraisal - one is $500, the other $375. I am told all costs will be rolled into the loan.

Currently Amerisave is at 3.75%, and FFKC at 3.625.

I am concerned about dealing over the internet; can you suggest any other options for me, including other lenders. Do you have any feedback on either of these two companies I am in contact with?

I refinanced my mortgage in 2009 from a no interest loan to a 30 year fixed at 4.75%. I currently owe approximately $249,000 on the original $259,000 loan.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Possible Home Mortgage Refinance? Buyer Beware!

Hi Betsy,

Congratulations on owning your home for 36 years!

When shopping for mortgage lenders, make sure you understand the terminology because a no-cost refi is very different from rolling fees into the loan amount.

1. No-cost refi: There should not be any out-of-pocket cost. Neither financing of fees. Important! This means the refinance should not increase your loan amount. But paying recurring closing costs (property taxes and insurances) or increasing your reserve account balances may be necessary, either by financing or out-of-pocket.

2. Little to no out-of-pocket mortgage refinancing costs: The refinance cost is added (rolled) into your loan amount. But don't think because there are no mortgage fees out-of-pocket that you are getting a no-cost refinance! You should review the Good Faith Estimate very carefully because you will be paying interest on the financed fees as you pay off your house.

Hoping to learn how to get the best deals on your home loan? For Buyer Beware help, go to...

Comparing Mortgage Rates Online

I am not against refinancing via the internet. But giving you a thumbs up or down for specific lending institutions is impossible because much, if not most, of the success of your refinance depends on the individual loan originator, not the bank.

This is why I would also caution you against using the lowest quote on a mortgage rate as your sole criteria in choosing a lender. So although I have set up criteria for comparing interest rates online, I still advise asking for referrals from trusted friends and family.

I also heartily recommend checking in often at my website. I announce all new Ask Kate letters at my blog. Read them through and you will be on your way to having developing a strong gut-instinct that will aid you in choosing the best lenders.

Remember, it's YOUR home and YOUR mortgage. So take charge of your refinance! Betsy, you deserve the best.

Good luck and best wishes,

Ask Kate

Question 2: Should I Refi My Home?

By Terrence from Stamm

Kate, I want to take advantage of the low mortgage rates, but I am not sure if refinancing is worth doing. Can I renegotiate my current loan with my bank to avoid paying all the closing costs?

I am looking to lower my monthly payment and reduce my loan period. Would it be better to go back to a 30 year fixed and make additional payments towards the principle or shorten the loan period and pay a lower rate?

I currently have a 30 fixed mortgage at 4.75%. My current principle is $375,000.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Should I Refi My Home? Buyer Beware!

Hi Terrence,

Yes, you can attempt to negotiate lower cost when refinancing your home, whether or not you choose your own bank. But I think you get the best results when you have something to offer in return for lower mortgage rates and fees.

Not sure what you have to offer? Just like the saying, "time is money", present yourself as a time saver. I can tell you from years of experience, mortgage originators appreciate borrowers who supply organized paperwork upfront.

I simplify this for you - Go here to my free Personal Mortgage Information Planner. Additionally, include a brief letter of explanation for anything out of the ordinary.

Just as important, extra paperwork is often required during the mortgage process. Assure your loan representative that you will respond promptly to requests for more paystubs or other documents if need be.

Once you have convinced your mortgage professional that you are a borrower worthy of negotiated fees, get a Good Faith Estimate to nail down the actual cost, followed by locking your mortgage interest rate.
Insist on Good Faith Estimates and Rate Lock Agreements, signed and in writing.
Again, as I told Betsy, this falls under Buyer Beware.

30 vs 15 Year Fixed Rate Mortgage Terms

What are the pros and cons of a 30 year term vs the shorter 15 year? Both being stable loans, choosing one over the other depends on your individual circumstances.

In my opinion, affordability is a deciding factor. Any inkling that your employment might change? Has your car developed an annoying rattle? New baby on the way? Taking the 30 year fixed rate is more affordable than its 15 year counterpart.

As you mentioned, you can pay more toward the principal to shorten your term but you retain the fall-back of a lower monthly house payment.
Important! Insist on No Prepayment Penalty and get it in writing!
Of course, on the flip side, you will unfortunately lengthen your pay-off time to an additional 30 years.

Or are your children grown? Do you have reserve savings to fall back on, even after paying cash for your latest vehicle? You might feel comfortable opting for a 15 year fixed rate with a higher monthly payment! You'll certainly pay significantly less interest!

To compare details of 30 to 15 year terms, use my free Fixed Mortgage Loan Calculator. Need help? Go to my calculator tutorial first.

Tip: Instead of refinancing and incurring mortgage closing costs, here's a painless way to pay off your house earlier than you've ever thought possible! For the details, go to my new book...

The Mortgage Freedom Project by Kate Ford

Best wishes,

Ask Kate

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USA Mortgage vs Bank of America
by: H. Bowen from Georgia

USA Mortgage has quoted me a 4.25% rate for a 30 year HARP 2 refinance, $2400 closing costs. My current lender, Bank of America, has quoted the exact same rates and closing costs.

Have you had any experience with USA Mortgage? Having my mortgage with BoA has been very trying and I would like to move to another lender, but I don't want to go frying pan to fire.

Hi H., Kate here.

Personally recommending mortgage institutions could be misleading. Here's why. With multiple lending offices and numerous employees, I don't think consistency can be guaranteed, in spite of company policies.

Everyone wants the lowest mortgage rate and closing costs. That's a given. But successful lending transactions are highly dependent on the quality and experience of the individual mortgage originator.

This is why I say qualifying your lender is a job interview. You are hiring someone to handle what may be your largest financial transaction.

Do this by asking questions that open dialog. Then follow the 10 Best Kept Secrets to Successful Refinancing.

Don't miss Terrance and Betsy's questions (above) followed by my answers for more help.

Best wishes for your refinance, Kate

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You can also ask Kate about your mortgage at How to Find Your Mortgage Lender.

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