Thursday, October 30, 2008

Mortgage Refinance Closing Cost

Mortgage refinance closing cost is cost at the end of the mortgage application. When the borrower refinances a mortgage, the borrower also pays the same closing cost to start a mortgage.

Some mortgage lenders offer low or no cost mortgage. It means the mortgage lenders pay for all or most of the non-recurring closing cost. Non-recurring closing cost means the borrower only pay one time. Non-recurring closing cost excludes interest, insurance, and property taxes.

The closing costs may include escrow fee, underwriter, document preparation, origination fee, appraisal, administrative fee, processing fee, wire transfer, mortgage broker fee, tax service fee, and flood certification.

Mortgage lenders charge a slightly higher interest rate. Then, the mortgage lenders get a mortgage rebate. Mortgage rebate is a certain percentage of the mortgage that goes to the borrower, or mortgage lenders. In return, the mortgage lenders use the mortgage rebate to pay off the closing cost. The interest rate may be 0.25%, 0.50%, or 1.00% higher than the regular mortgage.

In a no closing cost mortgage refinance, there are no discount points. Discount points are upfront fee to lower the mortgage. With a regular mortgage, the borrower has the option to lower the mortgage with the purchase of discount points. Each points represents one percent of the principal.
It takes time for mortgage lender to get the money back on mortgage rebate. The mortgage might take as long as 40 months to fully recover the mortgage rebate. So, the mortgage lenders are banking on the borrower to stay more than 40 months.

Since it takes time to recover the mortgage rebate, some mortgage lenders ask for a minimum mortgage principal. For example, the mortgage principal must be a minimum of $300,000.

In some state, the mortgage rebate is ban. So, some state may not have no closing cost mortgage refinance. For example, the mortgage rebate are ban on Alaska, New Jersey, Kansas, Oklahoma, Rhode Island, Louisiana, South Carolina, Mississippi, West Virginia, and Missouri. Consult your mortgage lender or broker.

To many borrowers, the no closing cost mortgage refinance provides an extra flexibility. The borrowers can take on a mortgage without paying for the closing cost. If a great mortgage refinance deal comes, the borrower can refinance again.

Dennis Estrada is a webmaster of mortgage calculators, mortgage rebate, and mortgage refinance website which calculate the monthly payment, bi-weekly payment, affordability, refinance, annual percentage rate, discount points, and more.

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