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No Closing Cost Refinance

The term “no closing cost refinance” is a misnomer – a myth like Big Foot or the Loch Ness Monster. It’s merely a sales term that promotes the false sense that there’s a benefit to the consumer. Mortgage Atlanta is here to tell you… there is NO SUCH THING as a “no closing cost refinance!” So, what exactly are these other mortgage companies talking about when they refer to a “no closing cost refi”? Let’s break it down… There are ALWAYS costs on any refinance loan… no matter what mortgage company, loan officer, bank or lender. There are appraisal costs, attorney fees, title insurance, recording fees and – here in the State of Georgia – an “intangible tax” on all mortgages. Apart from some loans that don’t require an appraisal, all other fees will be charged in your refinance. They are simply misleadingly hidden in a couple of ways. This does not mean that what the lender is doing is bad, it simply means that the way they are describing it is somewhat deceptive. The most common way they get away with it is to roll the costs into the loan. Meaning if your current balance is $150,000 and you have $3000 in closing costs, the new loan amount is $153,000. Therefore, the more appropriate terminology is a “nothing out of pocket” refi. Another way mortgage companies like to hide fees for a “no closing cost refi” is by paying all of the settlement fees on your behalf – seemingly out of the goodness of their hearts – and then charging you a higher interest rate to make up the difference. You can see this in loans with large lender credits. Don’t be surprise if you are – in fact – paying for those costs (and possibly even more) by taking out a higher rate for the life of the loan. That said, there is NOTHING wrong with rolling the closing costs into the loan or financing those costs through a higher interest rate if your mortgage lender is upfront and honest with you. At Mortgage Atlanta, integrity is the foundation of our culture. You can always expect us to shoot straight with you and never EVER push the concept of a “no closing cost refi.” Scout’s honor!

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VA IRRRL

Available to veterans, active service members and select military spouses, a VA Interest Rate Reduction Refinance Loan (IRRRL) provides a streamlined process for you to refinance an existing VA loan. With this type of loan, you are only allowed to finance the current balance plus any closing costs. You will not be able to walk away with any excess cash. Compared to most other refinance types, a VA IRRRL is typically easier, faster and less expensive. In most cases, there is no need to document income or assets, nor will you be required to have an appraisal performed – which helps streamline the process. It’s important to note that the VA does charge a funding fee of 0.5% of the amount borrowed to non-exempt borrowers. This funding fee can also be financed. Your Mortgage Atlanta loan specialist can walk you through the requirements of an IRRRL to help you determine whether this is the best refinance option available to you.

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Cash-Out Refinance

For borrowers seeking an option to accomplish things like home improvements or cover major expenses like college tuition or medical bills, a cash-out refinance might prove the ideal loan for you. In addition to monetizing a portion of the equity in your home, this loan represents the refinance of your current mortgage. Bear in mind that in many cases, the balance on the new loan will be higher than the balance on the loan you are currently paying off. Also, there are restrictions on how much equity you can take out based upon the loan program you choose. For most conventional cash-out refinance loans, you are permitted to pull equity out up to 80% of the value of your home. On other loans, such as VA loans, you may be able to go even higher. For illustration of this loan in action, let’s say your home is worth $250,000 and you have a current mortgage of $143,000. You would be able to take out a new loan for $200,000 (80% of $250,000) and you would receive proceeds of $57,000 minus any closing costs. There are also times when a borrower might do a cash-out refinance and not receive any actual cash. For example, let’s say you have a $150,000 first mortgage that you used to purchase the property and later took out a $50,000 HELOC to do some renovations. You could combine those two loans into one new loan at $200,000. If you are pulling equity out to pay off debt – a common scenario – the goal would be that the total payment on the new loan is less than the sum of the debt you are paying off. While cash in hand sounds like a great idea, bear in mind that interest rates on cash-out refinance loans are typically higher than their rate-and-term counterparts due to loan adjustments from Fannie Mae and Freddie Mac. There are many pros and cons to a cash-out refinance, so it is important to discuss this option with your trusted Mortgage Atlanta loan specialist to determine whether this is the right refinance loan for you.

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Rate & Term Refinance

A rate-and-term refinance involves the refinancing of an existing mortgage to change the interest rate, the length of the loan, or sometimes both. This type of refinance rarely allows the borrower to walk away with any extra cash in hand when the process is done. However, most programs do allow the borrower to use the new loan to pay off the existing loan, while rolling in any closing costs, escrows and prepaid interest. Among the reasons to choose this type of refinance are: the opportunity to lower your monthly payment by taking out a lower interest rate on your new loan; the prospect of shortening the term of your 30-year fixed-rate loan by taking out a 15-year loan; and the chance to convert your adjustable rate mortgage to a more stable fixed-rate mortgage. One important thing to note, if you have a HELOC or second mortgage on the property that was taken out after the original purchase, you most likely will not be able to use the rate-and-term refinance to combine the loans. Instead, you would need to use a cash-out refinance. When considering a rate-and-term refi, your Mortgage Atlanta loan specialist will help you ensure that the cost and benefits are in line.

Refinance

A home is a terrific investment – one that you can occasionally use to your advantage. But why wait until you’re ready to move to reap the rewards of that investment?  Here are some reasons to consider refinancing:
Get cash out of your home equity for another investment
Get cash from your home equity to fund home improvements
Save money on your current loan with a lower interest rate or monthly payment
Pay off debt
Convert a 30-year mortgage to a 15-year mortgage
Whatever the need, Mortgage Atlanta will find the right refinance loan option for you. Click on the buttons below to learn which options are available to you.
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