Question:
Why do no cost mortgage refinancing?
Answer:No cost mortgage refinancing can be a lot cheaper in the short run. For example, let's see the following example, using a web calculator.
| Mortgage Refinance Comparison Between A No Cost and Traditional Mortgage | ||
|---|---|---|
| No cost mortgage refinancing | Traditional mortgage refinancing | |
| Amount | $150,000 | $150,000 |
| Years | 30 | 30 |
| Interest | 7% | 6% |
| Points (discount plus origination) | 0% | 1.5% |
| Any additional closing costs paid in cash | 0 | $1,155 |
| Tax bracket | 25% | 25% |
| Years to keep the home before another refinance | 5 | 5 |
| No cost mortgage vs regular mortgage refinancing results | ||
| Monthly Payment (Principal and Interest) | $1007 | $908 |
| Total closing costs | $0 | $3,655 |
| Break-even (years) | Appr. 4 years | |
You could get a simple estimate of the break-even period yourself, dividing the cash-paid closing costs by the difference in the monthly payment. This will give you the number of monthly payments you will make before the break-even for the no cost mortgage refinance vs the traditional mortgage refinance occurs. Have in mind that different calculators may exhibit different result, if they take into account:
- how closing costs were paid - by cash, or were rolled into the loan;
- inflation levels;
- level of return of other financial instruments.
Recommended helpful present and future homeowners links:
Why: Refinance to a fixed rate loan while mortgage rates are still low.
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Why: Because FHA loans are insured by the US Federal Government they have very competitive interest rates and are easier to qualify.
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Why: Know and protect your credit report and score.
Link: See All 3 National Credit Scores & 3 Reports Instantly, Online & Free
Link: See All 3 National Credit Scores & 3 Reports Instantly, Online & Free
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Common misspellings: mortage and morgage