The closing costs on a refinance loan can add up quickly, perhaps putting refinance out of reach. If you are looking to refinance your mortgage loan to a lower interest rate, but can’t afford to pay out additional closing costs, you may be able to get a loan without paying out-of-pocket fees. In some cases, you might not be required to pay for a home appraisal. You may also be able to get the closing costs financed.
Decide if you are willing to pay a higher rate of interest for a refinance loan. Some lenders will allow you to take out a refinance loan without closing costs if you agree to pay a higher interest rate than you would otherwise be charged. You will be paying a rate that is higher than that for refinance loans that have closing costs included. Other lenders simply include the amount of your closing costs within your total mortgage balance so that no fees are due up front.
Contact your lending institution to ask if it offers streamline refinance options. Many lenders offer streamline refinance, although in most cases you can’t receive any cash back on your refinance. The purpose of the refinance is to lower your monthly payments. You will need to have enough equity in your home so that the lender can include your closing costs in your monthly mortgage payment rather than charging separate fees.
Find out if you qualify for an FHA Streamline Refinance if you have a loan that is insured by the Federal Housing Administration. According to FHA guidelines, you cannot be delinquent on your mortgage to apply for this type of refinance. The refinance also needs to result in lower monthly payments, so you won’t be able to take out any cash payments as part of the refinance process. If you are approved for a loan without an appraisal, the amount of the refinance loan cannot be more than the original mortgage loan. Contact your FHA lender to apply.
Apply for a Streamline Refinance if you have a VA mortgage loan. Your veteran’s benefits can help you refinance your loan without having to pay closing costs out of pocket. You must be current on your mortgage payment and have paid as agreed for the last 12 months in order to qualify for a refinance loan. The lender may offer to include closing costs in your final loan amount or ask you to pay a higher rate of interest.
Review all the terms of a no cost refinance loan carefully. Make sure that the closing costs are not being hidden among other fees. When lenders offer no closing cost refinance options they agree not to charge non-recurring closing cost fees such as an application fee and home appraisal.
Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.