Bankers Don't Want You to Know That You Pay for Your No Cost Home Loan ForeverWith 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 clich�, 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 Fri. March / 29 / 2024 Refinancing - Learning Center Zing! Blog by Quicken Loans Types of Mortgage Refinance Options Bankrate.com How to Refinance Your Mortgage NerdWallet Discover Home Loans Review 2024 - Mortgages Business Insider Will Mortgage Rates Go Down in 2024? What Homebuyers Should Expect Business Insider Underwater Mortgage: What To Do Bankrate.com Mortgage Refinance Rates: Compare Current Rates Business Insider Mortgage Interest Rates Today, March 28, 2024 | Rates Are Down This Week. Will They Stay That Way? Business Insider When to Consider Refinancing Your Mortgage Business Insider Mortgage Interest Rates Today, March 27, 2024 | Rates Down Slightly as Homebuying Season Ramps Up Business Insider 30-year refinance rates: What to know CNN Underscored The best mortgage lenders for refinancing in March 2024 CNN Underscored 15-Year Mortgage Refinance Rates: Compare Current Rates Business Insider Current mortgage refinance rates CNN Underscored Mortgage Relief and Mortgage Assistance Programs [2024 ] The Mortgage Reports Mortgage demand falls again HousingWire Should You Refinance Your Mortgage In 2024? Bankrate.com Best Mortgage Refinance Lenders In 2024 Bankrate.com Current mortgage interest rates: Mortgage rates today CNN Underscored Mastering Rate-and-Term Refinance: a Complete Explainer Business Insider VA Refinance Rates - Current VA Loan Refinance Rates Today Business Insider Current FHA Refinance Rates Today - Mortgages Business Insider MBA: Mortgage Applications Decreased in Weekly Survey Calculated Risk Refinance Requirements: What You Need to Refinance Your Home in 2024 The Mortgage Reports When to Refinance Mortgage: Is it Time? - Buy Side from WSJ The Wall Street Journal Conventional Refinance Rates and Guidelines for 2024 The Mortgage Reports How Soon Can You Refinance a Mortgage Loan? 2024 Rules The Mortgage Reports How To Refinance An Underwater Mortgage Bankrate.com How Soon Can You Refinance a Mortgage? NerdWallet Current 15-year refinance rates — and lenders that offer them CNN Underscored Mortgage Rates Chart | Historical and Current Rate Trends The Mortgage Reports Can You Refinance With No Income Verification in 2024? The Mortgage Reports Best Refinance Lenders of March 2024: Refinance Your Mortgage The Motley Fool What Credit Score Do I Need To Refinance? Bankrate.com Should I Refinance My Mortgage Now? When to Refinance As Rates Drop Business Insider Office of Research blog: A look at cash-out refinance mortgages and their borrowers between 2013 to 2023 Consumer Financial Protection Bureau How To Get Equity Out Of A Paid-Off House Bankrate.com CFPB Releases Study of Refinance Mortgage Loans Between 2013 and 2023 Consumer Finance Monitor Save up to $1,500 on a Mortgage Refinance With the New FHFA Program Business Insider Should You Refinance Halfway Through Your Mortgage? Bankrate.com Mobile Home Refinancing | Loans & Rates 2023 The Mortgage Reports
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