Are Houston jumbo home refinances without closing costs too good to be true?

This question is an important one to Houston jumbo homeowners who might be considering refinancing their mortgage at today’s record low rates. Given the economy, it is understandable that many people may not want to part with their hard-earned cash to pay for closing costs or they may not have sufficient funds to cover closing costs.  Don’t fret; you do not have to miss out on the refinancing boom due to a lack of funds. There are ways to cover your costs without breaking the bank.

First, we need to make one thing clear: there is no free lunch. You are not going to get a rock bottom rate with no closing costs.  Anyone who promises this is being disingenuous. Many closing costs are “hard costs” of your loan paid to third parties, independent of your mortgage lender. These include title insurance (the rates for which are set the by the state insurance commissioner in Texas), appraisal, recording costs, and in many cases, escrows for taxes and insurance. Your lender is also not going to work for free. Though their fees may not be charged directly to you, I am often reminded of the old Prego spaghetti sauce commercial that features the tag line “it’s in there”.  Well, so is your lender’s fee.

There are two ways to avoid paying some, or all, of your closing costs out of pocket. One way to do this (and still obtain some of the lowest rates available in the marketplace), is to roll these costs into your loan amount. The benefit of this strategy is that you keep your cash in the bank and get a very low rate. The downside is that you will end up paying more interest over the life of the loan because you are increasing your loan balance by the amount of the closing costs. This is still not a bad strategy, particularly if you plan to remain in your home for several years.

Another possibility is for your lender to pay all or a portion of your costs on your behalf. As we discussed earlier, there is a cost to this. You will have to settle for a higher interest rate. The lender will pay your costs and earn their fee when your loan is sold because the buyer of your loan will pay a premium for a premium rate. Nevertheless, if you can reduce your rate with no additional costs, you are saving money on your mortgage no matter how you slice it. I have been able to help countless homeowners using this strategy over the past month.

If you have a Texas mortgage with a rate of 5% or higher and would like to take a look at your refinancing options, please contact us at info@hlstx.com or at (832) 286-1600.  Many people we talk to about refinancing are astounded at the amount of money they will save over the life of their loan.  We can do a free refinance analysis for you and determine your breakeven point if you do refinance. There is also a Texas Mortgage app available for iPhone and iPad users that uses current rates to give you an idea of monthly payments on a refinancing.  Search the App Store on your device for “Houston Mortgage” or click here to download the app from iTunes.

Contact us today, we will be happy to help you save money!