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The two approaches to a mortgage refinance are to either pay the closing costs with equity from your property (i.e. increase the loan amount to pay the closing costs), or to build those costs into the interest rate, by choosing a higher rate, which then generates a rebate or credit of a discount fee. This second approach is often marketed under the misnomer of "a No Closing Cost loan", or a "No Fee loan". In all cases, every mortgage loan has closing costs because of the required third-party protocol and data (the Origination system, credit reports, appraisals, etc.) that has to be in a file for it to close. The only discretionary choice is how you pay for those costs. On our Refinance Good-Faith Estimates, we'll always credit you with the rebate earned as a result of your choosing a higher rate, and you'll always know what the lower rate and costs were as well, so you can determine which approach is the most effective for you.
In general, it would be to your advantage to borrow less at a higher rate if you're planning on selling the property in a fairly short time. You'd not have a substantial investment in closing costs, and thus no "recovery time" is necessary to justify the refinance - if the payment is lower, go for it. If you think you're going to be in the property more than five years or so, getting the lowest rate possible at reasonable costs will be justified in a specific "break-even" recovery analysis that shows when you'll actually be ahead on a monthly basis, with the lower payment.
While the "Prepaids" component of closing costs is routinely the same among lenders, because everyone closes on the same protocols, in a refinance you'll be establishing the same impound account at the new lender that you have at your existing lender . Thus you'll be refunded the impound balance from your previous lender after they're paid off. This means you can borrow a little less now, if you have the cash on hand to fund that impound deposit at closing, and you'll get your cash back in a few weeks. Or, you can fund the impound deposit from the new loan, and get extra cash back in a few weeks.
As a part of the refinance, the new lender will require that property taxes and your homeowner's insurance be paid current. Thus, you could have costs we've tried to over-estimate for. Also impacting the final numbers will be the exact payoff amounts to any previous lenders; interest on mortgages is paid after you've used the money, and thus the payoff will be higher than the balance, adjusted up for the interest charges to the day you actually pay the old loan/s off.
Lastly, remember that you probably won't have a mortgage payment on the first of the month following your refinance. This allows you to get ahead on your payment plan, payoff a credit card or whatever, or send money to the "Chase Kids College Fund". Just joking. Anyway, plan on something special from not having the payment.
Guaranteed Costs:
Would you rather know how much you're really paying, or be surprised?
The closing costs on the Good Faith estimate at time of locking the loan will be within $200 of the closing costs on the final HUD at closing or we will pay the difference.
Guaranteed service:
Would you rather know it's going to go well, or hope for the best?
If you are unsatisfied with our service for any reason we will refund 1/4 of our fee.
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