No Closing Cost Mortgages

The saying goes “if it’s too good to be true it probably is.”  A no closing cost mortgage is no different, you pay one way or the other. 

The way a no closing cost loan works is you end up getting a higher rate so that the closing costs can be paid through the premium with a higher interest rate.  An example is if market rates are at 4.25% paying no points a no closing cost mortgage might be at 4.75%.  You have to determine what is best for you depending on what your plans are for the future. 

If you need the no closing cost option because you are short on the monies needing to close than you might want to rethink purchasing a home.  There are more costs that come with owning a home than renting. 

It can be a tough call in this current market to decide because part of me says that rates are at historic lows so you want to lock in the lowest possible rate since you need to go into it knowing you need to hold onto the property for 10 years.  The other side of it is just when we think interest rates can’t go lower they do and if you did a no closing cost loan to begin with you would be able to refinance to a lower rate either paying closing cost only once or doing another no closing cost loan hoping they fall again. 

There are talks that the Fed will announce on November 3rd their plan to buy more mortgage-backed securities which in turn would make rates move lower temporarily.  I don’t think betting on anything the government is going to do is a smart decision.  I am not critizing our government or any specific party here it’s just I don’t recommend making your investment decisions based entirely on what they may or may not do. 

The safe bet is probably to pay the closing costs but each and every loan is different depending on their future and goals.  Always consult a Mortgage Professional first before deciding.