Home Mortgages: Does a No-closing-cost Loan Make Sense for You?
I have heard a number of radio ads and have seen many newspaper ads offering "no closing cost" home mortgages. These ads will tell you that you can get a new mortgage or refinance your existing mortgage at absolutely with absolutely no closing costs.. There are no points, no charges for an appraisal, no charge for title insurance, no costs, period. On the face of it, this sounds like a great deal and no-cost mortgages are especially popular with people who are refinancing an existing mortgage. How does this work? Normally, a 30-year, fixed-rate mortgage, would have closing costs in the neighborhood of $2,000 to $3,000 or even more, depending on whether or not you pay points upfront. In fact, we talked to one mortgage broker two weeks ago about a mortgage on an investment property we own in another state and the closing costs were quoted as $7,000 ? outrageous but at least not typical. You've probably heard the old adage, "there is no such thing as a free lunch," and these no-cost mortgages are yet another testimonial to the truth of this. The way that no closing cost mortgages work is the lender gives the mortgage broker a rebate at closing which the broker then uses to to pay the settlement costs. The way the lender gets its money back is by charging a higher interest rate. For example, for a $230,000, 30-year fixed rate mortgage with no upfront fees, your interest rate would most likely be a least 0.35% higher that if you paid one point and the customary closing costs. Here's an example of what this means. As of this writing, there were mortgages available at 5.250 %, plus one point. As you probably know, one point equals one percent of the mortgage so one point on a $150,000 mortgage would be $1,500. The monthly payment fo this loan, excluding taxes and insurance is $826.00. The closing costs would be $1,500 plus the normal settlement costs of, say, $1,500,A for a total of $3,000. Let's compare this with a no-cost mortgage. Assuming the interest rate is 0.35% higher as quoted earlier, the interest rate on a 30-year, fixed-rate mortgage would be 5.725%, yielding a monthly payment of $872.98 or about $46.00 per month vs. the loan where you would pay one point and the normal settlement costs. Given a savings of $46.00 per month, it would take you about 65 months ? or 5.5 years to make up for the $3,000 you paid in closing costs. This means that you need to determine how long you will stay in that house before deciding on a mortgage loan or a refi. If you intend to stay in that home and not refinance your mortgage for more than six years, it might make sense for you to pay the point and the normal settlement costs. On the other hand, if you believe you will sell that house or refinance it in less than five years, a no-cost mortgage might be better. Just make sure you look at all the various alternatives and their long-term costs before you leap into a new mortgage. For FREE help with debt and credit, subscribe today to Douglas Hanna's free email newsletter "8 Simple Steps to Debt Relief" at http://www.all-in-one-info.com
Related News
|
 |
|
|
RELATED ARTICLES
Mortgage Broker or Assassin? A Banker Who Offers You This Loan May be Trying to Kill You!
What if a banker or mortgage broker told you he's loan you 25 percent above the value of your home? You might think it sounds great, but I sure hope you'd say no. This is a loan only the most money-hungry and unscrupulous loan officers will sell. Few, if any, banks will do them. There are wholesale lenders, though, who will actually loan 125% of the value of your home.
Helpful Mortgage Advice
Mortgage advice overwhelming you? Many people get advice from everyone on the planet when they talk about purchasing a home. People tell them their version of advice on most important factors and expect the potential home buyer to do as they have instructed.
Unlock your Home Loan Piggy Bank
With the recent sharp increase in property values your current home could be a pot of gold.
Build Your Own Dream House!
So you're thinking about building your own house, are you? Well, you've come to the right place! It's a lot of fun (hard work and eventually fun!) to build your own home and it will save you thousands of dollars(we saved over a Hundred Grand by doing it ourselves - that's pretty significant cash!). If you happen to live in a Large City, like Los Angeles, or anywhere that Real Estate Values are 'close-to-insane', you could potentially save millions of dollars. Interested, you say?? Read on, My Friend, Read on...!
Stopping Foreclosures
If you as an investor understand the process, you will be able to help more people!
How a Commercial Mortgage Can Help Your Business
A commercial mortgage or commercial remortgage is a business loan which is secured against a commercial property.
Home Mortgage Loans - Fixed Rate, Adjustable or Balloon, Which One Is Right For You?
When you're shopping for a new home-especially for the first time-all the terms and expressions may be confusing and difficult to understand. Adjustable rate, fixed rate, balloon payment - how do you decide which is the right type of home mortgage for you if you're not even sure what each of them are?
How Much Home Loan Can I Afford?
Have you ever asked yourself how much home loan can I afford? If you know how much of a payment you qualify for before shopping for a home, your purchase will go much smoother and it can save you a lot of headaches.
An Infinity Mortgage?
Here in Spain the concept of a mortgage period of 20 or 25 years is something new. The general feeling by the banks is that want their money back more quickly than banks in countries in which they are accustomed to longer periods. The borrowers are also accustomed to the idea that the guiding principle is to pay off the mortgage as quickly as possible.
Secrets Your Banker Wont Tell You - Which Loan is Best for You?
Recently I was driving in my Car and I heard an Ad for a Mortgage lender who claimed they would help you find the Best Loan out of over 400 Different Loan Types. 400 Different Loan Types now that has to be confusing. How do you find the Best loan for you. Clearly the Best loan for you is not the Not the best loan for your bank. Learn the Secrets your Banker doesn't want you to Know.
High Risk Home Mortgage Lenders Online
Online high risk home mortgage lenders specialize in offering loans to people with adverse credit due to bankruptcy or other financial problems. By analyzing online quotes, you can find a reasonable mortgage loan even with poor credit. Loan approval is then just a matter of filling out your online application and reviewing some final paperwork.
A Home Equity Loan ? Is It For You?
Home equity loans are often touted as being the solution to so many things ? giving you access to money for home repairs or improvements, a way to consolidate debt, finance a sudden family emergency, or even as a way to start an investment portfolio. There's a lot to think about, though, before you go and sign up for the first home equity loan you see.
Mortgage Tips For The Frantic
It is a curious fact of human nature that people will haggle over the price of an umbrella, but buy a house on impulse.
Should You Refinance Your Mortgage if Interest Rates Drop?
Mortgage refinancing is when you take a mortgage of a certain interest rate and term length, and change it for a different interest rate and term. If you are looking to refinance your home loan it is usually done when rates have dropped considerably therefore making it advantageous to do so. When I say considerably it usually means a drop of at least 1% from what you're paying now.
Home Equity Loan Considerations
In other words, the benefit of the loan must outlast the loan period. Taking a loan for financing that elusive vacation is a strict no-no. Moreover, home equity loans must also never be taken for day-to-day expenditures. This option should be saved for emergency needs only.
Buying A Home With No Money Down or Bad Credit - PMI Can Make It Easier
Private mortgage insurance is an excellent method for homebuyers who have trouble saving money, are short on money, or have bad credit, to get into a home now. Private mortgage insurance is provided by a third party to protect the lender in the mortgage contract. This allows you to purchase a home with a much smaller down payment and if you have bad credit. You should note that this service does not protect you as the buyer; it protects the lenders such as a mortgage broker or a bank.
Refinancing Your Home - How and Why?
Chances are you may need a little extra money to get some work done around the home or perhaps your current interest rate is 7.5% and the prime interest rate is 6.0% there is a benefit to restart the clock on an existing mortgage and save thousands of dollars over the life of the loan. The first thing you must realize is that refinancing your home can also be tax deductible, meaning that you will receive an extra tax advantage for the closing costs associated with a refinancing no matter what the condition, even in bankruptcy!
Home Equity Loans 101
A secured home loan differs from an unsecured loan in that
the secured loan borrows against one's home as collateral,
thereby reducing the risk to the lender.
Bad Credit Home Financing - Get The Mortgage Loan You Want Even With Poor Credit
Having poor credit alone cannot hold you back from getting the home loan you want. Buying a home that is everything you want in a home, is a very exciting experience. The blemishes on your credit history will not alone keep you from getting the home you want and the home you deserve.
Alternative Options For Rising Interest Rates
As interest rates have risen in the last six weeks from record lows, homeowners are once again face with finding viable options to reduce the amount of interest paid on their home loans. The rush to refinance provided borrowers with good to excellent credit the opportunity to take advantage of low interest rates, that helped to reduce their monthly mortgage payments, which was the only benefit provided by the lowered rates.
|
