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See what's happening with home values in more than 400 metropolitan areas with HSH's Home Value Tracker, just updated though the second quarter of 2022.

See what's happening with home values in more than 400 metropolitan areas with HSH's Home Value Tracker, just updated though the second quarter of 2022.

Can I refinance for free?

Keith Gumbinger

Q: Are there refinance loans that truly do not cost you anything?

A: You can find a mortgage refinance which will cost you nothing out of pocket, but the trade-off is that you exchange paying no fees for a higher-than-market interest rate. This is because there are legitimate fees which must be paid in conjunction with granting you a loan, and the lender will pay them on your behalf.

You still might need some cash on hand

You might find that you'll need some cash to fund new escrow accounts for things like taxes and insurance for the new loan. However, when the old loan is closed out, you should expect a refund of the unused portion of those from the old loan's escrow accounts, so you'll get your money back, if a little delayed.

Provided the increase in the mortgage rate doesn't devalue your refinance too much, there are some good reasons to have the lender pay the fees:

  1. You might not have much cash on hand
  2. You might not want to commit the cash you do have on hand to your mortgage transaction
  3. Generating the cash might include a taxable event, such as by selling stocks

Another option: Use your home equity

Also, there is another route you can take if you have some equity in your home -- you can pay the refinance fees by increasing your loan balance a little bit. Called a "low cash-out refinance", this would prevent you from paying any cash out of pocket and allow you to get the lowest possible refinance rate.

Refinance calculator: Decide which option is best

Deciding which option is best certainly depends on your personal situation. And when it comes to financing your refinance, you have more than one option. To help you decide which refinance option is best, to see how these refinance choices could play out over the years, utilize our refinance calculator which will plot out your savings on a side-by-side basis.

Related: What does a refinance cost?

Ask the expert
Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President, HSH.com
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
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Q: How are mortgage interest rates determined?
AUG 18, 2022
A:

Mortgage rates fluctuate from day to day, depending on a number of factors related to the economy and to choices made by investors. While some mortgage money comes from deposits held by banks and credit unions, most of the funds for borrowers come from investors in capital markets.

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Mortgage rates are influenced by a variety of factors, rather than moving in lockstep with any one economic indicator. The stock market rises and falls for a wide variety of reasons, including global, economic and political issues, but as a broad rule of thumb, a rising stock market indicates optimism among investors about the economy.

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A:

For the most part, this is a discussion about time. You should compare the total costs of the difference in the two interest rates over your given time horizon.

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