NO CLOSING COST HOME LOANS

As I pen this information today, hundreds of mortgage brokers and lending institutions are jumping on the latest residential loan trend. “NO CLOSING COST HOME LOANS�.
I know that I can’t turn on the radio and not hear about this new loan with no closing costs, and no fees at all.

Does it get my attention? It sure does! After years of ferreting out this fee and that fee, paying $800.00 for an appraisal that cost the lender $250.00, my ears do a double take.

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.

Here is the good news!

If there are no fees, then obviously I don’t have to worry about paying more fees than I should. What a time saver this could be. I don’t have to shop around just to find out what fees are standard and who will charge me less. There is nothing to worry about on the fee structuring of any deal.

Here is the bad news!

You’re paying for them anyway!!!! Certainly I am not naïve enough to know that the lender isn’t going to make their money on you! You shouldn’t be either. With a few phone calls and a little more research, here is what I found:

A small increase in the interest rate affords the lender or mortgage broker a higher yield on the commission they are paid on the loan. Yes that’s right. Brokers receive what is equivalent to a commission with out charging fees up front. They have before and they are going to continue to do so now. With a slight up tick in the interest rate they can raise your monthly payment from $100.00 to $300.00 even though you actually qualified for a lower interest rate. Hence you will pay back those fees in anywhere from 20 to 30 months in higher payments and then pay even more the remainder of the loan term.

With this information now in front of you, my faithful blog participants, You tell me what strategies we (you and I )could use to benefit by this new trend!

I look forward to hearing from you soon!!!

Cary Beagley