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No cost mortgage?

Trying to get clarification on what a no cost mortgage is and the difference between a no cost mortgage and a traditional mortgage. How do I know which is going to be better for me?

Jan 26, 2012 by Brett from Dallas, TX  |  Flag
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No-cost mortgages don’t eliminate closing costs, they are simply wrapped into the loan balance and are then paid over time. I see a lot of people who get sales calls from mortgage brokers talking about these "no closing cost" mortgages but the devil is in the details.

On the matter of which is best for you, it depends... Do you have a lot of cash available now? Would you prefer to keep cash and pay a slightly higher monthly payment?

1 Comment   |  Flag   |  Jan 26, 2012 from Orland Park, IL
Daniel

No cost mortgages don't only occur when fees are wrapped into the loan balance, but more accurately, paid by a yield that the lender receives from a higher interest rate. Generally speaking, no closing cost mortgages make LESS sense, the longer you plan on keeping the property/loan. This is because you could save a couple thousand dollars in the short term, but pay .25% higher than necessary in RATE over the remainder of the loan term, which could mean A LOT more interest over the life of the loan.

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Flag |  Mar 25, 2012 near San Marcos, CA

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