Mortgage zero cost refinance catch?

[Simple Man]

I just got a call from my mortgage lender offering a zero cost to me refinance. It's been less than a year since we refinanced with them and the rates have dropped almost 1%. What's the catch? Why would they offer this? Obviously they are in the business to make money. I'm at work so I didn't talk to them long. Do they just roll the closing cost into the loan?

[Dejashoot]

So you don't go to see their competition and move your loan somewhere else?

[cosmiccowboy]

Just ask what the APR is. That's bottom line.

[wes122984]

Just ask what the APR is. That's bottom line.

x2

[Hawk77]

There are no free loans. Period. Either you pay fees or pay a higher rate and they credit you the closing fees.

[JayB]

It is in the rate..even if it is only 1/4%...its in there!

JayB

[Nova]

If it saves you money go for it. I got one of those offers over the phone. I went over it with a fine tooth comb and it was legit. I didn't pay one penny. I din't pay for title, appraisal, nothing... It was a mail in closing and they even covered postage. If it was like mine you have a chance to throw the deal once you get the paper work in hand and review it.

[BrianL]

There are most likely some fee. they may roll it in to the loan so no out of pocket expense.

[quarterback]

Generally it's rolled into the note. Watch out though, while all that sounds good they will nickel and dime you to death with fees, many of which are negotiable and/or bogus. Be sure to ask for a closing statement in advance of the closing so you can check everything out.

[mjbtexas]

True, people dont just hand out thousands of dollars for free... but sometimes it makes sense to roll in closing cost depending on your break even (closing costs/$ savings per month) is shorter than you plan on staying in the house.

I'd love to help you, its my profession.

[HogHunterBall]

well correct me if I am wrong but if the % is still lower then the competition its still worth it....correct?

Even if it is built in

[Hawk77]

Right now, on many FHA loans, I am doing Streamline Refinances. The market rate might be 4%. If you currently have a rate a 6% or 6.5%, I will offer a rate of 4.5%, and issue a lender credit to offset the closing costs. This way, it reduces the amount of time it takes to break even. You are saving money, and skipping a month of mortgage payments after it is closed. It also keeps your mortgage balance from increasing substantially(because of the lender credit). Most of the time, no appraisal is needed. We also don't need to verify income or assets. As with any refinance, always evaluate the length of time you plan on being in that house, and weigh it with how long it takes to recoup the costs of the refi.

[ken]

So you don't go to see their competition and move your loan somewhere else?

This.

[Birddog66]

There are most likely some fee. they may roll it in to the loan so no out of pocket expense.

This is what I was thinking.

[refugioco]

generally it's rolled into the note. Watch out though, while all that sounds good they will hundred dollar you to death with fees, many of which are negotiable and/or bogus. Be sure to ask for a closing statement in advance of the closing so you can check everything out.

fixed