Monday, October 10, 2016

No Cost Mortgage Refinancing - Jon Arpon

Let's jump right into the meat and potatoes of what everyone wants. Everyone wants a supposedly "free" refinance and let me shoot down your dreams right off the bat,THERE IS NO SUCH THING as a FREE REFINANCE. We are not a charitable organization and we must make money to like, pay child support, buy food, pay rent or our own mortgages as well. BUT there is hope my friends, so let's get into the nitty gritty of the 3 ways to take care of closing costs for a refinance.
  1. You can just pay cash for whatever closing costs there are. (but who wants to do that right?)
  2. You can finance them into the loan. (which is what most people do anyways)
  3. You can raise your interest rate to cover the closing costs and not have to add so much money to your principal balance of your mortgage. (this is good and bad)
Numbers one and two are self-explanatory, so let's get into number three and what that means for you. Every rate has a "cost" or a "rebate", the higher the rate the more of a "rebate" you potentially can have. Let me give you a very simple example:
Here is an example of pricing of a $375,000 Conventional loan. 30 Yr Fixed Rates
Now the 3.375% rate is at a cost of $4,912, what that means for you is if you wanted to get a 3.375% rate we would have to finance $4,912 on top of other closing costs like recording fees, title fees, pre-paid interest and escrows essentially. Listen there's so much more to this but I am making this simplified, I actually know some mortgage bankers in my industry who don't know how to do this believe it or not.
Let's go all the way down to the 3.990% rate, that means instead of of a $4.912 "cost" I can give you a $5,175 "rebate" which is kind of like a coupon towards any sort of closing costs.
So let's say for example we are doing a conventional loan with a 30 year fixed. Let's get into something called the "par rate." The par rate in the most simplest terms possible is the rate that you get doesn't have a "cost" but also doesn't have the biggest "rebate" neither, and in this instance it would be a 3.625%, Are you following me? I hate numbers, and I know what you're saying, well he's Asian so he MUST be good at math... I'm decent but by no means am I mathematical superstar. So check this out folks, we can do a 3.625% par rate which is one with no cost and with not a whole lot of rebate neither. However you'll have to finance the closing costs into the loan.
Let's do a super simple example that even only requires basic arithmetic skills. Your loans closing costs altogether run about $5,000 that needs to be financed into the loan,
You can do one of three things,
1.You can pay cash for that and there are different ways to do it depending which lender you use.
2.You can take the par rate at 3.625% and finance the rest into the loan. (which is what most people do)
3.You can email me at so I can go ahead and beat whatever rate they're giving you and give you the best structured deal to put you in the best financial position possible. (I am so serious too)
Okay that was a sidebar, but seriously if your closing costs are $5,000 and you don't want anything financed into the loan, you could take the 3.990% and have a "No Cost Refinance." because the "rebate" alone would take care of the $5,000 closing costs into the loan, which means you wouldn't have to bump up your principal balance because you took a higher rate. I'm not here to get into the pros and cons of it but it's easily understandable why someone would not want a higher interest rate.

- Click here to download my app on the Google Play Store

And this my friends is how a"No Cost Refinance" works. If you have any questions feel free to send me a message on LinkedInFacebook, or Instagram. (You're going to do research on me anyways I'll make it super easy for you)
-Thanks for reading and happy shopping my friends.

1 comment :

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