Many Utahns are tempted to a refi not just because of the opportunity to snag much lower interest, but also to access instant cash. Above all, the real appeal of some refinancing products is the absence of closing costs. Without upfront fees to worry about, a no-cost refinance is certainly a lure most homeowners can’t resist.
But you should know that this unconventional financial product is only advantageous under the right circumstances. So, before you shop around for the lowest mortgage refinance rate in Salt Lake City, Orem, and Provo, understand that it’s only worthwhile to not pay the closing costs in these situations:
When You Don’t Have Much Cash to Pay Upfront
Obviously, your lack of liquidity is your main motivation for considering a no-cost refinance. Suddenly, not having enough cash is no longer an issue to lower your monthly repayments and save in interest over the life of your mortgage.
Realize, however, that your interest rate may slightly increase if you opt not to pay for the closing costs. There ain’t no such thing as a free lunch, as economic experts say. But comparing your perceived new and current monthly repayments is the only key to finding out if you’re really saving or not.
When You Wouldn’t Be In It in the Long Haul
A refi is truly promising if you’re planning to move and sell your property in the near future. Especially if you’re on a fixed-rate mortgage and only in the early years of your repayments, switching to an ARM could seriously save you thousands of money during the initial period.
When You Plan to Refinance Again Later On
The common mistake of a novice serial refinancer is choosing to pay the closing costs. Considering that you’re planning to reset the clock again in the next few months or years, the break-even time on your new mortgage might be too long to recoup your expenses at closing.
A no-cost refinance would allow you to worry no fees, and pay a marginally highly interest rate in return, instead.
No-cost refinancing is a welcome option for the cash-troubled and strategic borrowers. Although it still comes with a price, the meager increase in interest is just a small sacrifice execute your financial plans.