Mortgage and Refinancing Information Channel:
We would like to thank the local libraries, schools, and universities for recommending students to visit us when doing research on any of our information topics.
Bankers Don't Want You to Know That You Pay for Your No Cost Home Loan Forever
With mortgage rates continuing on a downward trend, the competition in the business is fierce. A day never passes that I don't hear some crazy advertisement about a new loan program that XYZ mortgage company has and no one else offers. One of the oldest programs remains steadfast in both its high profile and its duplicity. This program is the No Cost Home Loan -- the one bankers say is free, but you actually pay for as long as you have the loan.
The no closing cost home loan is virtually everywhere. It is advertised in the mail, on radio and on TV all the time. "Hey, refinance your loan today, and there will be no closing costs," the ads scream. Wow, a free loan. Imagine the money you'll save. So, if you are in the market for a refinance loan or home equity line, which you probably should be, with rates at all-time lows, you might consider running to XYZ mortgage company, who is now offering free mortgage loans.
Just be careful you don't go bankerupt, along the way. Remember, the old cliché, Nothing in life is free, because it makes a lot of sense. You actually can get a mortgage with little or no closing costs. What bankers don't tell you (one of their great secrets) is that you pay a higher interest rate than you really qualify for, when you get your loan for "free." So, you might save $2,000 or $3,000 in closing costs, but your monthly payment could be $100 to $300 higher than it would have been if you had actually paid the costs.
Imagine taking this loan and saving $2,000 in total closing costs. Perhaps you borrow $200,000. Now, if you simply pay all the costs and tell the banker you want the best rate available, let's say it is 6% for this example, you would have a monthly payment of $1,199. Now, let's assume the Wiley banker convinces you to pay no closing costs and take an interest rate of 7%. He might say, "Now, your interest rate will be a bit higher, but you'll save $2,000 in closing costs." Sounds great, you might think.
What he doesn't do, though, is spell out the difference in the 6% rate you could qualify for, versus the 7% rate you choose to take for your "free" loan. If you borrow $200,000 at 7% interest, your monthly payment is $1,330. This is $131.00 more each month than you will pay on the same loan at 6% interest.
If you choose to pay the closing costs and save $131.00 monthly, it will take you 15 months to get your $2,000 in closing costs back. Now, if you keep this loan for five years beyond that first 15 months, you will save an additional $7,860 at the 6% interest rate. If you listen to the crafty banker, selling the No Cost Loan, you'll allow nearly eight thousand dollars to drift right up your home's chimney.
Unless the difference in the interest rate on your no closing cost loan and the loan with costs is a tiny amount, say .125%, you are almost always better off paying the costs. Be sure to ask what the difference in the rates is. Then learn exactly what the total closing costs will be. Calculate the difference in the two monthly payments (one with closing costs and one without). If that amount will pay back your closing costs in two years or less, and you intend to remain in your loan for at least five years, pay the costs and take the better rate.
Use this method, and you'll never go wrong.
Mark Barnes is author of the wealth-building system, Winning the Mortgage Game and other investment real estate books. He is also a suspense novelist, and his new novel, The League, will thrill both suspense and sports fans. Learn about Mark's wealth-building system and get his free home loan course at http://www.winningthemortgagegame.com. Learn more about The League and read an excerpt at http://www.sportsnovels.com
MORE RESOURCES updated Sun. February / 16 / 2020
As mortgage rates remain near three-year lows, here are 5 questions to ask yourself before you refinance your mortgage - MarketWatch
As mortgage rates remain near three-year lows, here are 5 questions to ask yourself before you refinance your mortgage MarketWatch
Weekly mortgage refinance applications spike 15% as interest rates plunge to lowest in nearly 4 years - CNBC
Weekly mortgage refinance applications spike 15% as interest rates plunge to lowest in nearly 4 years CNBC
How to refinance a mobile home in 2020 | Mortgage Rates, Mortgage News and Strategy - The Mortgage Reports
How to refinance a mobile home in 2020 | Mortgage Rates, Mortgage News and Strategy The Mortgage Reports
Right now would be a good time to refinance your mortgage Tampa Bay Times
Refinancing Boom Fuels Mortgages to Postcrisis Record The Wall Street Journal
10-Year Refinance Rates | Compare rates today Bankrate.com
20-Year Refinance Rates | Compare rates today Bankrate.com
Falling Rates Could Boost Mortgages Ahead of Spring Selling Season The Wall Street Journal
Fixed mortgage rates hit three-year lows but may be headed higher soon The Washington Post
15-Year Refinance Rates | Compare rates today Bankrate.com
Want to pay off your mortgage early? Consider a 15-year refinance | Mortgage Rates, Mortgage News and Strategy - The Mortgage Reports
Want to pay off your mortgage early? Consider a 15-year refinance | Mortgage Rates, Mortgage News and Strategy The Mortgage Reports
February mortgage outlook: Rates at three-year lows cleveland.com
U.S Mortgage Rates Rise for the First Time in 4-Weeks Yahoo Finance
Mortgage rates today, February 10, 2020, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy - The Mortgage Reports
Mortgage rates today, February 10, 2020, plus lock recommendations | Mortgage Rates, Mortgage News and Strategy The Mortgage Reports
The Daily Shot: Mortgage Refinance Activity Highest Since 2013 Wall Street Journal
FHA streamline mortgage refinance guide Bankrate.com
30-Year Refinance Rates | Compare rates today Bankrate.com
Money: Good reasons to consider refinancing now | Business News Arizona Daily Star
Arvest Bank says 2019 was a record year for its mortgage division talkbusiness.net
7 Simple Tricks for Saving More Money The Motley Fool
Find jumbo mortgage loan limits by state Bankrate.com
Why Older Americans' Average Credit Score Is Goals The Motley Fool
Arvest Bank's mortgage volumes grow Springfield Business Journal
Mortgage Rates May Be Low, But Youâ€™ll Still Need To Shop Aroundâ€”Especially In These Cities - Forbes
Mortgage Rates May Be Low, But Youâ€™ll Still Need To Shop Aroundâ€”Especially In These Cities Forbes
How to refinance your mortgage and save money every month Business Insider
Refinance or not? Getting a better deal isn't a slam dunk, but low rates offer compelling choices - AZCentral
Refinance or not? Getting a better deal isn't a slam dunk, but low rates offer compelling choices AZCentral
How long does it take to refinance a mortgage? Bankrate.com
Editorial: Fully fund KPERS sooner rather than later The Topeka Capital-Journal
The Best Mortgage Refinance Companies for 2020 | Mortgage Rates, Mortgage News and Strategy - The Mortgage Reports
The Best Mortgage Refinance Companies for 2020 | Mortgage Rates, Mortgage News and Strategy The Mortgage Reports
What to know before refinancing your home loan The Washington Post
What Is Mortgage Refinancing? Motley Fool
5 things I've learned from refinancing my mortgage Business Insider
5 common myths about refinancing your mortgage Bankrate.com
Does Personal Finance Still Work in Our Changing Economy? The New York Times
Should I refinance my mortgage while rates are low? Bankrate.com
5 Questions to Ask Before You Refinance Your Mortgage HowStuffWorks
Mortgage rates havenâ€™t been this low since 2016 â€” hereâ€™s how to decide whether to refinance your home loan - MarketWatch
Mortgage rates havenâ€™t been this low since 2016 â€” hereâ€™s how to decide whether to refinance your home loan MarketWatch
When does refinancing into a 15-year mortgage make sense? The Philadelphia Inquirer
Americaâ€™s best places to live in 2020 Bankrate.com
When Should You Refinance Your Mortgage? | HowStuffWorks HowStuffWorks
4 reasons to refinance your mortgage at a lower interest rate Business Insider
How to Refinance a Mortgage and When to Do It TheStreet.com
Pros and Cons of a Cash-out Mortgage Refinance HowStuffWorks
Refinance mortgage rate trends higher for Friday Bankrate.com
Ready to Refinance? Ask These 5 Questions First Realtor.com News
Refinance rates ease for Friday Bankrate.com
4 irresistible perks of a VA mortgage refinance Bankrate.com
BP lays out plans to be net zero in emissions by 2050 The Boston Globe
Refinance mortgage rate slides for Thursday Bankrate.com
Refinance mortgage rate retreats for Wednesday Bankrate.com
Refinance mortgage rate falls for Thursday Bankrate.com
Should I Refinance My Mortgage? Motley Fool