Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

No-cost refinancing

Dear Dr. Don,
We are currently paying 8.75 percent on a $55,000 mortgage and, because we are in our 50s, we don't want to increase the size of the mortgage when we refinance. I heard on the radio about a mortgage loan where you could refinance at no cost if you refinance for one point above the interest rate. I think the lender was called Arc or Ark, but I can't find any information about this, nor can our mortgage broker!! Can you please help?
Thanks,
Judy Jostle

Dear Judy,
With some help from my good friends at Google, I found an Ark Mortgage Inc. in North Brunswick, N.J., and ARC Mortgage in Crestline, Calif. What I'll tell you and what your mortgage broker will tell you is that you don't need to chase across the country to find a mortgage structure that meets your needs.

The thing to remember is that one way or another, you'll be paying the closing costs and fees associated with the refinancing. Bankrate's survey of closing costs closing costs shows the different costs you will face and how they range in value. If you chose a mortgage loan with no closing costs, the costs will either be added to the loan balance or added to the interest rate.

The no-cost loan, where the interest rate is marked up to cover costs, makes the most sense if you plan on being in the house for a short period, typically less than three years. If this is the house you plan on retiring in, then either capitalize the closing cost (add it into the loan balance) or pay it at closing.

Use Bankrate's refinancing calculator to determine how much you'll save in interest by taking the new loan.

-- Posted: Oct. 29, 2001