One of the biggest drawbacks of refinancing a mortgage is the cost involved: lender fees, title insurance premiums and escrow charges, as well as payments to appraisers and other third parties. Even homeowners who could benefit greatly from refinancing may not be able to cover the costs. To these consumers, then, the term “no closing cost refinance” has great appeal.
So, how does a homeowner know which refinance is best? In general, the no-cost refinance makes most sense when the borrower does not expect to have the loan for more than a few years. A more specific answer can be obtained with LendingTree’s Refinance Breakeven Calculator, which allows borrowers to calculate the savings and costs of no-cost, no out-of-pocket cost and traditional refinances (the costs can be changed by opening up the “assumptions”).
If you can find a no-cost mortgage that’s better than your current loan, you should ALWAYS refinance. Otherwise, consider the benefits of refinancing to make sure it’s worth it for you
Lowering your monthly payments can loosen the belt on your household budget and allow you to focus on some other changes you might want to look into – like sitching to a fixed-rate mortgage. Your lender will be able to help you address all the variables.
If you’re not significantly paying down the principal, you could be throwing money away. By lowering your interest rate, you could conceivably pay off your mortgage faster while your’re chipping away at that principal,too.