Refinancing Without Closing Costs[an error occurred while processing this directive]
One of the big questions for any home owner has to do with what you should do with your home equity. It's an important part of the equation for any home owner, but should you be touching it? Should you, instead, be willing to let it sit there as a nice security blanket? These are tough decisions and the right answer ultimately depends upon your own situation. Some people will want to borrow against their built home credit, while others will probably want to let their equity sit there and nest. What you should know is that a no closing cost refinance makes it much easier to pull the trigger. If refinancing is a numbers game, eliminating this cost is very important.
Refinancing to take out equity
One of the most common reasons to seek refinancing is to pull out equity, and you will see varied opinions on this. Some people will tell you that, unequivocally, it is a good idea to take out money for certain purposes. For instance, if you need to pay for medical bills but you don't have the cash on hand. Other reasons would include putting improvements into your home for value's sake, or perhaps debt consolidation. Other people like to get the equity in an effort to pay for college without resorting to expensive student loans. These are all smart moves depending upon your situation.
If you are looking to pull out equity in your home, you should first think through the consequences of the action. This is a very important decision and you will essentially be forfeiting a very nice insurance policy. The home equity that you build makes you more secure financially and it should serve as your financial base line. Pulling it out can make sense, but you shouldn't do it without careful thought and consideration. With that being said, when is the right time to make such a move?
No closing cost refinance takes the burden off
A no closing cost refinance will save you potentially thousands of dollars. If you have ever bought a home originally or worked to refinance, then you know what the deal is. Mortgage companies make you pay big time fees to close your loan. You will generally have to cut them a check to make it happen. They do this for a number for reasons. For one, they know that people would just refinance their loans every time there was an interest rate drop if it weren't for closing costs. This would create a hectic situation where no one honored their current rates and banks were unable to do any business as a result. With closing costs out there, people have to honor their mortgages.
No cost refinancing, on the other hand, gives you the ability to get a better rate without the huge cost on the back end. In this, home owners can save upwards of $10,000 depending upon the size of the refinance. There are a few lenders that offer this kind of deal, and you can usually get pre-approval for a mortgage refinance with no closing cost. A mortgage refinance with no closing cost won't come from just any lender, though. You should look around well if you want to find no cost refinancing.
Only making the move if the term is right
When no cost refinancing surfaces, the deal often looks so good that people want to drive right in. They want to take advantage of the lower rate, so they ignore the fact that their term just got extended out an extra eight years. Sure, you might save some money now, but your lower rate will be more than made up for when you are paying on the home for eight additional years. If you are going to go with a no closing cost refinance, then you have to make sure the lender is willing to give you a shortened loan term. Not only is it more expensive to pay the loan for that long period of time. It's also more tedious and limits you in how often you can move.
Ultimately it makes plenty of sense to refinance when the closing costs are thrown out of the window. A smart consumer will look to these options if he or she can get pre-approval. You will save thousands of bucks and you will be able to move into a loan that provides a lower payment. Likewise, this can be an awesome way to get into your home equity if you have some legitimate reason for using it. Be smart when dealing with refinancing and home equity, though. This is one of your most important financial resources, so it would be unwise to make a hasty decision. Only take the leap if you are certain that it's both necessary and in your financial best interests down the road.