No Closing Cost Mortgage

No Cost Mortgage

Despite popular marketing, there is no such thing as ““no closing cost” mortgage.

No one works for free, not even no-profit companies.

Mortgage companies will either bury the cost in the mortgage by giving you a higher rate or raise the amount that you are borrowing.

To my knowledge in most if not all states they have to disclose closing costs.

No Cost Mortgage

Simple answer is a higher interest rate. However, it is more complicated then that.

When a company offers you a “no cost” loan, what they are actually doing is paying for the costs of the loan themselves, however they will charge you a higher interest rate to re-compensate themselves for the money they paid out.

All loans will have costs, such as title insurance, escrow fees, recording charges and etc. These are third party fees and someone must pay them. A typical “no costs” loan will have these fees however the lender will pay them and recoup their costs from the interest you pay to them over the long run.

The key to determine whether or not this is a good deal for you is to figure out how much the costs are for the loan and then figure out how much the difference is in the interest rate and monthly payment.

For example, if the costs are going to be around $3,000 and the difference in payments from the interest rates is say $50 then you will have a break even point of 60 months. If you keep the loan for more then 60 months, you will pay over time MORE money in interest then what the closing costs were suppose to be. However, should you only keep the loan a few years (less then 5) then you will have paid less in interest and would have saved yourself some money.

Whatever mortgage company you work with, find out what the costs will be and also what the difference will be in the interest rate and payments between the two options. Figure your break even point and then make your decission on which loan would be better.

Good luck

No Cost Mortgage

You just have to show you can qualify for it. It’s not really a special mortgage. If you don’t want closing costs, you just pay a higher rate. That’s all those loans are.

Costs and rates are like a see-saw. If one goes up, the other goes down and vice versa.