Is the zero refinancing home loan real ?

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I am planning to buy my first home and applying for a home loan and one of the lender said this to me

” If you take your mortgage with us and after 4 payments are made, if the rate goes down by a .25% we will refinance you at no cost”

1) Do they really refinance at NO(zero) cost of the rates go down .25% ?

2) Are there any other charges which are hidden which lenders charge if we refinance at a later stage when rates drop ?

  1. Reply
    April 29, 2011 at 11:08 pm

    Ask them if they’ll provide that guarantee in writing.

    Since it would be the same lender, it would really be a loan modification. In only 4 months time, the only expense to them would be to pull a new credit report (we pay $ 12 – $ 18 for them), and whatever it costs to draw up the papers. They could use the same appraisal, title policy with maybe a small addendum, and flood cert. The escrow wouldn’t have to change because your taxes and insurance would be affected. It would be very possible, if you’re dealing with a reputable lender.

    When the market was so slow last fall, my company offered no closing cost purchase money loans. The rates were comparable to other lenders, and we just absorbed the closing costs. We’re over run with refinances right now (mine is taking at least 3 months, which is a little longer than for people who don’t work here). We’ve always paid the closing costs on home equity loans and lines of credit in TX, and lines of credit everywhere else, if you took at least a minimum initial draw, and you could just put it back tomorrow if you didn’t really want it.

    It’s not unheard of, but you want to be sure of what you’re getting. If you’re dealing with Joe’s the broker, or Joe’s Mortgage Company, or the First National Bank of Joe, I’d be leary. If it’s somebody you’ve heard of like Wells Fargo or Bank of America, I’d say it’s probably true, but get it in writing.

  2. Reply
    April 29, 2011 at 11:10 pm

    All they’re saying is that if rates go down .25% or more after you’ve made at least four payments, they’ll drop your rates. It won’t cost them anything but a little paperwork – won’t need a new appraisal or title search, for example.

    They are NOT saying your rate would go to zero, just that they’ll drop it and not charge you a fee for the change. And by the way, if you go with them, I’d get that in writing, including how they will assign the new rate.

  3. Reply
    April 29, 2011 at 11:14 pm

    Some lenders have such offers. It refers to the administrative costs of the refi – NOT the new interest rate you’ll pay. Just remember that they can change or rescind that offer at any time.

  4. Reply
    April 29, 2011 at 11:33 pm

    Get it in writing and read every single word of that, especially the fine print. It is very unlikely that they do not have a million clauses, including the right to rescind at any time.

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