Zero Cost Refinance
While highly valued in some areas of the world and never heard of in others, the zero cost refinance option is such a blessing it deserves to be talked about.
Basically, any qualified borrowers can exchange the payment of traditional closing costs involved in a refinance for a slightly larger interest rate, most commonly about a quarter fraction of a percent.
Some of the closing costs include items like Title insurance cost, country recording fees, appraisal costs, lender underwriting fees, attorney settlements, and the list goes on.
Here’s how it works.
Large quantity Lenders are willing to offer the originating mortgage company a small cost, in exchange for the higher interest rate. The Mortgage company sells your refinance to the lender for different terms. the mortgage company pays the borrower’s closing costs at the settlement table, with the fee the lender offered, which is referred to as a “yield spread premium”. The Mortgage company keeps the balance as it’s fee. The Borrower does not pay any fees for this transaction, and the closing costs are not tossed in with the loan amount, hence the term “zero cost” refinancing.
