You hear it on the radio and TV commercials all the time “No Closing Costs out of your Pocket.” It’s is the last part that most people don’t hear in these deceptive advertisements. The truth is there are certainly closing costs involved. Every loan has costs associated with it. The important part is how it is packaged. There are many loan officers and companies out there that will try and deceive you. They will say no points, but then turn around and have outrageous underwriting or processing fees. They may also try and put the fees in a different section of the Good Faith Estimate in order to conceal the true amount of what they are charging. Of course, they tell you not to worry because none of the fees are out of pocket fees and they will be rolled into the loan. In addition they may charge additionally higher fees in order to get you a lower rate. 

What most people don’t realize or never calculate is what the break even point will be after they spend all of the money refinancing. They are just excited to have a lower rate then everyone else.

If you are working with a true professional and an expert in the mortgage industry they will likely show you several different options of how to structure your loan. That way you will be an educated consumer and therefore make an educated decision as to what Mortgage Plan will be best suited for your financial needs and goals.

Many times I will end up structuring a “True No Cost Refinance” for my clients. A true no cost refinance is structured completely different then what you may expect to see when you meet with your Certified Mortgage Planner. Your interest rate is a little higher then what it would be if you were to pay your own closing costs. By charging a little higher interest rate we are able to cover part or all of the closing costs. That way they are not rolled into the loan and it did not cost you anything to refinance your house. You start saving money right away. Instead of having a break even point of 5 years or more down the line when you pay your own costs, or even worse pay points to buy down your rate. This scenario is especially effective if you don’t plan on being in your house longer then 5 years, or if there is a chance that rates could go lower within the near future. 

Using a true no cost refinance also enables you to be able to maximize your interest savings by allowing you to refinance with every incremental rate drop of .25% – .5%, depending on your loan amount. Most often refinancing for that small increment would never payoff if you had to pay closing costs every time that you did it. 

I hope this information proves beneficial to you and keeps you from spending thousands of unnecessary dollars. 

Please contact me or blog here with any questions. I would be happy to put together a personalized mortgage plan just for you and help you manage your mortgage going forward. 

Curtis Schartz

Certified Mortgage Planning Specialist

Pulaski Bank Home Loans