No Closing Cost- Fact or Fiction???

In an ever changing market the consumer is going to be subjected to marketing efforts by mortgage companies to offset the decline of refinance business along with the current crash of non conforming lenders. Recently a number of NO CLOSING COST ads are hitting the television and print news. The Consumer should be aware that although they will not be paying the closing cost, someone (the lender) will. In order for the lender to absorb the cost of an appraisal, title insurance, their fees, etc. they will increase your interest rate to offset those costs. Although this is not a bad program, the consumer should be aware that the lender paid closing cost are an option on any program, should you wish to take the higher rate. If you simply wish to look at a quick calculation, take the cost of all fees, (DO NOT include prepaid items i.e. insurance, taxes, and prepaid interest) for example on a $ 100,000 loan, we will assume $ 1500.00 closing cost at no origination fee/ no discount loan and a rate of 6.375%. A NO closing cost loan at a rate of 6.75%

$ 100,000 @ 6.375% over 30 years is a payment of $ 623.88

$ 100,000 @ 6.750% over 30 years is a payment of $ 648.61

Based on our scenario the lender is paying $ 1500 for the NO CLOSING COST loan. This is when the consumer must decide whether the $ 24.73 additional monthly mortgage payment is worth the NO CLOSING COST option. This is where the consumer must consider their personal financial circumstances and make an informed decision. If the current rate is higher then it is a given that you would want to take the option unless you are extending your mortgage out for a much longer term. If you are only going to be in the home for another two or three years it may not be an option to consider. Borrowers should compare a rate with closing cost and then ask for the NO CLOSING COST option and then do the math. If your lender can not explain your options or assist you in calculating your personal case................. Find another lender.

Sunny Mortgage Group

KS