How do closing costs for zero point and no cost mortgage differ?


Borrowers often wonder how to make a choice between zero point and no cost mortgage. The no cost mortgage is a very popular option to accept a slightly higher rate (up to .500% ) in exchange for the lender covering all non-recurring fees at closing - appraisal, credit report, broker and lender fees, title insurance, escrow, etc. Fees that do not fall into that category are interest, insurance and property taxes.

With a zero point mortgage you will not be taking a higher rate upfront, but will have to cover the abovementioned non-recurring base closing costs.

Closing costs for zero point and no cost mortgage differ in purpose and are different ways to take - in a no cost mortgage the borrower is happy to get the higher rates in exchange to refraining from paying cash. With the zero point mortgage you will cover closing costs but get a better rate.In the long run, if you are not planning to stay on the property for more than 5 years, a no cost mortgage may make more sense, since it will take several years to break even if you buy points. If you do not have cash at hand, the no cost mortgage can be the better choice.

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