No Cost Refinance in Kansas City

When considering a refinance, homeowners in Kansas City have multiple rate and cost options. You can pay upfront points to secure a lower interest rate, which results in higher closing costs. Alternatively, a no-point loan comes with a slightly higher interest rate and third-party fees, such as appraisal, title insurance, and county recording fees. Finally, a no-cost refinance offers a unique solution.

What is a No-Cost Refinance?

A no-cost refinance is when the lender provides a closing credit to cover third-party fees, such as appraisal, title company, and county recording fees, in exchange for a slightly higher interest rate. This means you avoid out-of-pocket expenses, but your interest rate will be higher than if you paid the costs upfront.

Is a No-Cost Refinance Right for You?

To determine if a no-cost refinance suits your situation, consider these key questions:

  • How long do you plan to stay in your home?

  • How much will the interest rate increase with a no-cost option?

  • What is the breakeven point for a no-point loan with third-party costs versus a no-cost loan?

  • Are there upcoming financial changes, such as job transitions, children attending college, or retirement?

The interest rate increase depends on factors like whether the property is a primary residence and your credit score. Investment properties or certain loan types, like adjustable-rate mortgages, may not qualify for a no-cost refinance.

Calculating the Breakeven Point

To calculate the breakeven point for a no-point loan with third-party costs versus a no-cost loan, divide the third-party closing costs by the monthly savings. For example:

  • $3,000 (closing costs) ÷ $50 (monthly savings) = 60 months to recoup costs.

The breakeven point shows how long you need to stay in the home to recover the loan’s costs. With a no-cost loan, the breakeven point is immediate, making it ideal for shorter-term ownership. However, if you plan to stay longer than three years, a no-point loan with third-party fees may be worth comparing.

Contact a mortgage advisor at Metropolitan Mortgage to find the most cost-effective loan for your ownership term.

Typical Refinance Closing Costs

Closing costs vary based on factors like purchase price, loan type, and credit score. Common fees include:

  • Appraisal Fees: Cover the cost of determining the home’s current market value, if required.

  • Credit Report Fees: Charged for each borrower applying for the loan.

  • Government Recording Fees: Fees charged by the county to record the mortgage.

  • Underwriting/Administration Fees: Cover the cost of processing the loan.

  • Title Service Fees: For closing/escrow services and conducting a title search.

  • Survey Fee: Typically for new construction to confirm land boundaries or subsurface improvements (e.g., septic tank or well).

Many lenders charge loan origination fees, even for refinances. However, Metropolitan Mortgage does not charge origination fees unless you choose to buy down the interest rate.

A true no-cost refinance includes a lender credit that covers all third-party costs. Be cautious of “no-fee” loans from other lenders, which may exclude lender charges but still include third-party fees or origination costs. Some lenders may roll closing costs into the loan balance, so always review your loan estimate and closing disclosure.

Comparing Closing Costs vs. No Closing Costs

Before choosing a loan, compare options with and without closing costs to determine the most affordable financing for your ownership term. A no-cost loan is often better for short-term ownership, while a loan with costs may save more over a longer period. Borrowers often focus on the lowest rate, but the cheapest overall financing depends on your specific situation. Request a written estimate to evaluate your options.

Impact of Closing Costs on Loan Balance

Rolling closing costs into your loan increases your total mortgage balance. For example, refinancing a $300,000 mortgage with $5,000 in closing costs results in a $305,000 loan. Here’s a comparison:

  • No-Cost Loan: $300,000 at 5% interest, 30-year term, monthly payment of $1,610.46 (principal and interest).

  • Loan with Costs: $305,000 at 4.75% interest, 30-year term, monthly payment of $1,591.02.

The loan with costs saves $19.44 per month but reduces your equity by $5,000. Consider your priorities when choosing.

FAQs About No-Cost Refinance

What Are the Benefits of a No-Cost Refinance?

A no-cost refinance maintains your current loan balance by covering traditional closing costs, preserving your home equity. However, the trade-off is a slightly higher interest rate, which reduces monthly savings compared to a loan with costs. A mortgage comparison can clarify the best option.

When Does a No-Cost Refinance Make Sense?

A no-cost refinance is ideal if you plan to stay in your home for five years or less. It avoids upfront costs, and you’re likely to sell before recouping closing costs through monthly savings.

When Is a No-Cost Refinance Less Beneficial?

If you plan to stay in your home long-term, a no-cost refinance may cost more over time due to the higher interest rate. Additionally, cash-out refinances may not qualify for no-cost options.

Why Choose Metropolitan Mortgage?

At Metropolitan Mortgage, we offer true no-cost loans with lender credits that cover all lender and third-party fees. Our experienced loan officers can compare options side-by-side to find the most cost-effective solution for your needs. You can also use our Refinance Calculator to explore options independently.

As a family-owned mortgage firm based in Overland Park and Kansas City, we serve Kansas, Missouri, and the broader Midwest. Contact us for mortgage questions or to get a rate quote.

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