Debunking The Most Common Mortgage Refinancing Myth Debunking The Most Common Mortgage Refinancing Myth
If you are currently shopping for a home and a mortgage you may have received a special offer for a free refinance later and once rates come down. This sounds pretty good, right? But are these offers really something special that your lender is going above and beyond on? Below, we explore whether a free refinance offer is really all that special.
Key Takeaways:
- Some financial institutions present no-cost refinances as a special offer for homebuyers
- No-cost refinances are generally a win-win for both homebuyers and lenders
Are Free Mortgage Refinance Offers Special?
If you're shopping around for a mortgage rate in the current market, you may have seen or received an offer for a free, no-cost refinance on your home once rates come down. Often, lenders frame this type of offer as a "special deal" for valued clients. But are these types of offers anything special?
In short, no. In fact, many banks (including Leader Bank) have offers for no-cost refinances. It's often framed as a "special offer" because the no-cost element understandably sounds attractive to buyers who are just beginning to pay off their home loan.
How Do Free Mortgage Refinance Offers Work?
- No-cost refinances (or any refinance) earn lenders a commission even though the homeowner is getting a lower rate.
- Lenders will often price the closing costs into the rate so instead of offering homeowners the lowest rate they can, they increase the rate slightly to cover the closing costs.
- No-cost refinances are often still usually a benefit for homebuyers –because the buyer gets a lower interest rate from their current rate and saves money up-front on closing costs.
Debunked: Not-So Special Free Refinance Offers
While no-cost refinances are a great option for homebuyers who are buying when rates are high, they are not exactly a special offer since many lenders offer them. Lenders who offer a no-cost refinance at closing may be trying to set themselves apart from their competitors, but in reality, many financial institutions will offer you exactly the same lending solution.
Looking to refinance when rates fall? Leader Bank's expert loan officers are ready to help you find the ideal lending solution for your homeownership goals.
