There are a number of mortgage lenders advertising loans with no closing costs. These lenders brag that the mortgage comes with no closing costs, up-front points, appraisal fees, title insurance, or origination fees. If you sign up for this mortgage you pay nothing out of pocket at closing; sounds like a great deal, right? On the surface, this does sound like a great mortgage deal. Its what the lender isnt telling you that make these loans and the mortgage lenders that tout them sleazy. If you were to go out and finance your home with a traditional 30 year, fixed interest rate mortgage the average closing costs would run you between $2,000 and $3,000. This doesnt include any points you may be required to pay at closing. No closing costs mortgages are simply a way for the mortgage lender to disguise the fees they are charging you. Lenders do this by marking up the interest rate they are charging you by as much as 1 or 2 percent. This markup on the interest rate is going to cost you significantly more than the $2,000-$3000 you would pay at closing on a traditional mortgage. If you stay with the mortgage for more than six years, this loan will cost you more than paying the closing costs up front. In almost every situation it will save you money to pay the closing costs and shop for the most competitive interest rate. To learn more about common mistakes homeowners make when shopping for a mortgage sign up for a free mortgage guidebook. |
