Frequently Asked Questions:

Q:  Is there such a thing as a “No Cost” mortgage?

Technically speaking, there are always costs involved with any mortgage transactions.  Appraisal, inspection, underwriting, prepaid taxes, insurance, interest….  the list can go on. However, there is a way to structure a closing cost and interest rate scenario that will decrease the amount of fees, or how a borrower pays them.

Basically, the costs to produce the new mortgage are either financed into the loan amount, or covered by the lender in exchange for a slightly higher than market interest rate.Deciding on the best option involves weighing the difference in cost up-front vs the increased monthly payment over a set period of time.

Q:  How long do I have to wait to refinance after a purchase transaction?

The rule-of-thumb is 8-12 months, but there may be exceptions.  It’s important to check with your lender at the time of initial application to make sure there aren’t any short-term penalties for refinancing within the first year. Another thing to consider is the cost of refinancing.  If you’re watching the market and may want to lock in a lower rate in the near future, it may be more cost effective to pay a discount point for a lower rate vs paying for a full refinance a few months later.

Q:  I heard that I should only refinance if I drop 1% on my mortgage, is that true?

Some people say ½%, 1% to never. Every mortgage is different.

Q:  Why can’t I just compare my current payment to the proposed payment and figure out my net benefit?

You could just compare just the two payments if you wanted to find out your cash flow savings, but the current and proposed loans may have two different amortizations. Let’s say you have a 15 year mortgage currently and you are comparing to a 30 year mortgage. If everything else is the same (interest rate, loan amount, etc) except for the amortization your interest savings per month would be $0 but, you are going to show a cash flow savings because of the longer amortization.

Q:  Do I have to refinance with my current mortgage company?

No, you may choose any company you wish to refinance your mortgage since the new loan will replace the old mortgage.

Q:  Is it easier to refinance with my current mortgage company?

Sometimes your current company can reduce the documentation that is required, but this usually comes at increased costs and interest rate. Make sure that you check to make sure you’re getting the best deal.

Q:  Will I automatically qualify?

No, you will have to qualify for your new refinance. However certain programs will allow for reduced documentation like the FHA to FHA Streamline.