“How Much Does a NO Cost Mortgage Really Cost?”

I know I’m not telling you anything that you don’t already know, there is no such thing as a free lunch and there is no such thing, as a NO closing cost mortgage. The only way this happens is the borrower/consumer pays a higher interest rate.

Normally the rate is higher from a ¼% to ½%. So let’s see what the math looks like. As an example, let’s use a $200,000 loan. The closing costs would be $2500 to $3,000. Let’s use 4.5% as a rate, when someone pays the closing costs and for 30 year, a payment would be $965.

Now let’s add 3/8% to the rate the payment now becomes $1013. The difference is about $48 and over 30 years that is $17,413 and over 10 years $5,789.

There is one more point, if someone plans on owning a property for less than 5 years, a no closing cost option might be a possibility, but I would rather see the client in an adjustable rate mortgage which will be about 3/4 of a percent lower interest rate. When we get this finite, I would have to make sure I understand what is in the best interest of the client.