Home Affordable Refinance Programs and No Closing Cost Refinance
Considering refinancing your mortgage, but want to make the decision that will save you the most money? It is possible. Consider your options carefully, though, and be sure to make sure that you're well aware of your obligations, and any hidden costs that might be included in the option you choose to refinance mortgage. Your lender can advise you on the best course of action.
If you haven't fallen behind in your mortgage payments, but a drop in your home's value has made it impossible for you to get traditional mortgage refinancing, you might qualify under HARP (the Home Affordable Refinance Program). It's designed to help you get a more stable, affordable refinance mortgage. There is an application and underwriting process, and there will be refinance mortgage fees. You can qualify under Home Affordable Refinance Program if you meet the following criteria:
- The mortgage must be guaranteed or owned by either Fannie Mae or Freddie Mac.
- The mortgage must have been sold to one or the other on, or prior to, May 31, 2009.
- The loan-to-value ratio is more than 80%.
- You must be current, and you must have made your payments on time for the past year.
No Closing Cost Refinance
Closing costs on a refinance are usually around $4,000. You can, however, get a no closing cost refinance, and avoid having to pay for things like underwriting, processing and appraisal fees.
On the face of it, that sounds good, but if the mortgage company waives the closing costs, you may end up paying a higher interest rates. Other times, the company rolls the closing costs into your total balance, meaning that your mortgage payments will end up higher.
Having said that sometimes, a no closing cost refinance does make sense. For example, if you're not planning to remain in the home for any more than five years, or if you're planning on refinancing again soon, the higher interest rates over the course of your monthly payments will not likely exceed the amount that you would have paid in closing costs. Essentially, you're going to have to do the math in order to determine if no closing cost refinance outweighs what you're going to be paying out in interest.
Perhaps you're considering doing some renovations or upgrades to your home, but you don't have the cash available. In this instance, you could end up better off by either accepting a higher interest rate, or adding on to the balance of your loan. You can also consider a home equity loan, so compare the interest rates on both the refinance mortgage and the home equity loan in order to determine which is best for you.
If you're planning on remaining in your home for a long time, it's generally better to pay the closing costs and benefit from the lower interest rate or the lower loan balance. Otherwise, you can opt for a no closing cost refinance.
If you don't qualify under Home Affordable Refinance Program (HARP), there are still options available to you. When you're considering a no cost closing refinance, there are websites you can use (Zillow Mortgage Marketplace is a good one) to compare your options. Be certain to filter the quote results so that they show only "no points" and "no fees" mortgage quotes. And of course, you can always get in touch with your lender to find out if they'll offer you a no closing cost refinance.