Question:

Are there real no-cost mortgage loans?

Answer:

Not really. No-cost mortgage loans are only packaged as a no-closing-cost loan, but the borrower is charged either by a higher rate or taking a large loan amount producing greater interest income to the lender.

No-cost loans are those for which the lender agrees to pay all borrower's settlement costs except those like escrow, mortgage insurance and several others that simply cannot be avoided at closing.

It is important not to mistake no-cost with no-cash mortgage loans. While the lender pays settlement costs for a no-cost loan in exchange for higher rate, a no-cash loan simply signifies that the lender has rolled settlement costs in the loan.

No-cost mortgage loans are not necessarily a bad thing. They are often a rather nice option for a short term. However, to make it worth, you will need to refinance before the break even occurs, which may be difficult sometimes.

Advantages of No-Cost Mortgage Loans

The greatest advantage comes for short-term borrowers. By accepting somewhat higher rate, they will have slightly larger mortgage payments, but avoid immediate closing costs expenses.

Another advantage of taking a no-cost mortgage is that borrowers avoid possibly getting charged with junk fees.

A no-cost mortgage loan is a very beneficial refinance option. Settlement charges are pretty low and lenders are readily offering no-cost refinances.

Also, no-cost mortgage loans are easy to be located online with a big reliable lender.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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