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What is a no-closing cost loan, and is it right for you?

Rob Chrisman - Weekly Commentary


A mortgage isn’t free. There are fees associated with obtaining a loan, and any lender advertising “This loan won’t cost you a cent” is not entirely truthful. Closing costs usually total thousands of dollars. Besides writing a check to pay those fees at the closing table, there’s another way to pay them when you refinance your mortgage: by adding them to the loan amount. The result is called a no-closing-cost refinance. The trade-off is usually a higher interest rate if you are not forking out the closing costs up front.


No-closing-cost mortgages are attractive to borrowers who don’t have the cash to pay fees upfront. Waiving the closing costs may be the ticket to getting a mortgage for a new home or a refinance. Our Advisors will usually tell a client that if you don’t plan to stay in your home for more than five years, a no-closing-cost mortgage could make sense. The slightly higher mortgage rate associated with a no-closing-cost mortgage is likely to be less expensive over five years than what you would pay upfront in closing costs. Paying a slightly higher interest rate to forgo closing costs may also make sense if you need the cash to do renovations on your home.


When doesn’t it pay? If you plan to stay in your home more than five years, a no-closing-cost loan likely will end up costing you more than a loan with closing costs. That’s true whether you’re taking out a mortgage for a new purchase or refinancing an existing loan.


As noted above, loans are not free. Fortunately, our Mortgage Advisors know that various programs, pricing, and services appeal to various borrowers. Opes offers a variety of pricing options for every loan: ask about those options. It’s up to consumers to decide if the trade-offs make sense.


While Opes Advisors, Inc. uses all reasonable efforts to ensure that this information is current, accurate and complete on the date of publication, no representations or warranties are made (express or implied) as to the reliability, accuracy or completeness of such information. Opes Advisors, Inc., therefore, cannot be held liable for any loss arising or indirectly from the use of, or any action taken in reliance on, any information appearing in this email.