Refinance Waive Closing Fees

Closing costs or closing fees are costs associated with any real estate transaction involving a loan. When you are thinking of refinancing your existing mortgage, consider that even a small rate cut can affect your balance and allow you to pay off your loan sooner. You must have noticed many mortgage companies that claim to waive closing fees against mortgage loans. Waiving the fees sounds good, but remember that nothing is free. Most of the time the lender's fees are removed from the closing costs but other fees may replace those. Several mortgage providers use the phrase ‘no closing cost' as incentive to engage new customers from all around.

Pros and Cons of No Closing Fee Loans

When a mortgage lender claims to offer a "no closing cost" option, for refinancing it does not mean that you don't have to pay any money at closing. It generally means that the loan process would not have any lender fees. But you still have to pay for title insurance, the credit check, appraisal, and other charges that are applicable. You need to ask your lender for a good faith estimate that will include all of those charges the company will place on your loan. The original charge may differ during closing, but still you will know what you are required to pay.

It has been noted that lenders offering ‘no closing cost' usually charge higher rates of interest to make up the difference. So, while you go for refinancing, you need to look at all the three primary factors of your transaction:

* interest rate
* fees
* points
Sometimes lenders also add the closing costs to the original loan amount and claim to have no closing cost at all.

No Closing Cost and Securitization

Apart from the lender's fees, there are also some other fees which are not offered by the providers free of cost. So, the lending company has to pay those third parties and this amount has to come from somewhere. The best provider for the lending companies, in this case, will be you, the borrower.
Banks and mortgage companies make a huge number of loans. They pool them together and use them as security for loans that they get from their customers. This process is called securitization. The loans they get are in the form of bonds, which they sell on financial markets. Institutional investors buy these bonds and expect a certain return on their investment. This is how the rate of interest is fixed by the mortgage lenders.

Way to Find Out Whether Your Refinancing Has No Closing Cost

The best way to find out as to whether your loan is truly a no closing cost loan is to simply substantiate the current outstanding loan balance on your existing loan and confirm it with your new loan amount. If you make certain that the only fees you are paying are the recurring costs of interest, insurance and taxes, you can understand that your loan is no closing cost.