Refinance Without the Fees


At a distance, refinancing your mortgage to score a lower interest rate and reap some savings makes all the sense in the world. But for many homeowners who qualify for a refi, the upfront costs, which can be anywhere from three to five percent of the new loan, is very discouraging.

The good news is there are ways around the closing costs and fees.  Just ask Allison Cheng.

Starting in June, the 32-year-old homeowner from Queens, N.Y., will pocket around $400 a month thanks to a recent refi of her 30-year fixed mortgage. She reduced the interest rate from 6% to 5.125% with her existing mortgage lender, Wells Fargo (Stock Quote: WFC).  She could have gotten an even lower rate from other banks, considering the national average on a 30-year fixed rate is around 5% according to But Wells Fargo lured her in with its “3 Step Refinance” program that eliminates those tough-to-stomach closing costs and fees.  Cheng estimates she saved anywhere from $7,000 to $16,000 in upfront costs based on quotes she received from other lenders.  It was also a more convenient process.

“We applied by phone, faxed in some paperwork, signed and notarize the packet of documents...and we were done,” says Cheng. The entire process from phone call to approval took about two months.  She didn’t have to take time off work or hire an attorney for help. Even the envelope she sent back to Wells Fargo with her signed documents came with pre-paid postage. 

If you’re curious how to reduce your upfront costs, too, consider these two refi methods.

Streamline Refinance

If you have a loan secured by the Federal Housing Administration (or FHA) you may qualify for a streamline refinance, which is another way to speed up the application process and potentially reduce upfront costs. This program, which reduces the amount of paperwork and underwriting that needs to be done by the lender, has been around for close to 30 years. 

“This is one of the original streamlining programs that was meant to try to encourage borrowers to refinance their loans,” says Bill Rice, managing editor of mortgage news site  Check out the FHA site to learn more about the program and borrower qualifications.

And in April, Fannie Mae (Stock Quote: FNM) and Freddie Mac (Stock Quote: FRE) introduced the Refi Plus program as part of President Obama’s Making Home Affordable plan, which should also speed up many more refi applications.  It will in some cases eliminate the appraisal fee, using an automated risk assessment system to appraise homes.  Refi Plus will also ease the traditional application requirements, making eligible some borrowers with lower credit scores.  Call your lender and ask if your loan is Fannie Mae or Freddie Mac-insured. Then see if you can qualify for a streamline refinance.

No-Cost or Low-Cost Refinance

Allison Cheng used a relatively new refi program, the 3 Step Refi, from Wells Fargo, that’s basically meant to eliminate upfront costs for existing borrowers. In exchange you may have to assume a slightly higher interest rate over the loan’s term. Other banks are introducing similar programs that are called “no cost,” “no out-of-pocket costs” or “low cost” refinancing.  Experts say you should ask your existing lender about these specific options.

“Regardless of your situation you should be calling your lender and finding out if you are eligible for these programs,” Rice says. 

Visit BankingMyWay to determine if a No-Cost refi program is worth it for you. 

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When and How to Refinance Your Mortgage

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Obama Says Refinance Now!

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