How No Closing Cost Mortgages Really Work
Many of the mortgage lenders today offer loans with “no closing cost mortgage.” These companies talk big about their mortgage with no closing cost, title insurance, up-front points, origination fees, or appraisal fees. Most of all, they say that if you will avail of this mortgage, you will pay nothing at closing. Probably, this offer sounds too tempting, right?
On the other hand, this doesn’t look like a good mortgage deal. Instead, it appears shady as there are still some things that the lenders aren’t telling.
In any case, if you will go for the most common 30-year mortgage plan to finance your home, the preset interest rate in the average closing costs can be anywhere between $2,000 to $3,000. This figure still doesn’t have the points with which you may be asked to pay at closing.
Clearly, the no closing costs mortgages schemes are just one way of covering up some fees that the lenders are charging you. They do this through raising the interest rate by as much as one to two percent.
The raise in the interest rate will significantly cost you up to $2,000 to $3000, just the same as with the traditional mortgage. If you will continue with the mortgage for over 6 years, you will be paying more than the closing costs up front.
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