Everyone has seen the ads on television, or heard about some bank testing a “no closing cost” mortgage loan, but aren’t these loans just a gimmick to reel you in? Truth be told there is no such thing as a “no cost mortgage;” you always pay one way or another. One way mortgage companies and banks offer no ost loans is by talking about their charges and no one else’s. This could refer to processing or origination fees and not the third party settlement charges due at closing.
There is usually an asterisk associated with these offers and a lot of fine print indicating that other fees will apply. Other offers might state”no lender fees” and while this is much closer to the truth borrows should know they make up the difference elsewhere. A true no closing cost loan would mean that you do not pay for anything. Attorney fees, credit checks, title insurance, and all settlement fees would be paid for you. The problem is there are a lot of third party companies involved and someone has to pay them for their services.
If you don’t pay third party companies involved with your mortgage, it means the lender will have to pay them. When the lender pays the settlement charges, you pay the lender in the form of a higher interest rate. You pay a higher mortgage rate in exchange for the mortgage company paying your closing costs. Is this a no cost mortgage loan? Not when you’re paying that higher interest rate for the entire duration of your loan.
You can learn more about your mortgage options, including costly mistakes to avoid with our free mortgage video tutorial.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
I want a no cost no fee loan combining my first and second into one, 15 year loan for less than $1875/month
Can you offer this?
First – $200,000, current 15 year, 5.375% fixed
Second- $30,000, current 20 year, 7.6% fixed
I live in 90274
Home Value – $1,000,000
Excellent credit
Income – $150k+