Before we start, let’s get one thing straight: There is no such thing as a “No Cost” loan! Lenders don’t buy the naming rights to football stadiums by doing loans for free!! I promise you that if you are getting a mortgage, the lender is making money!
Now that we have that cleared up, what is possible is to save money with a true “No-Closing Cost Loan!” This animal does exist in the real world, and can be a great deal, if the situation calls for it.
Recently, one of Terry’s clients wanted to move to the Charlotte Metro area, and needed a mortgage to purchase his new home. He was going to be able to pay the mortgage off within a very short period of time… probably 6-12 months. Initially we looked at traditional 30 year loans, but I had an idea, and using my software tool, was able to show this buyer how to save $2,054 in one year!!
Below is the actual comparison chart I sent to the buyer:
Although the third option could have saved the buyer even more money, he chose the last option for the lower monthly payment. Most lenders don’t take the time to compare the “Total Cost” several loans over a period of time, and very few homeowners keep a mortgage for the full 30 years! That means that the numbers being used to compare 2 or 3 different loan options aren’t even accurate!!
Don’t make the mistake of shopping for the lowest rate! Shop for the Lowest Cost. You will probably pay too much. Lenders are smart enough to find ways of showing the best rate and still charge you more money. There can be higher fees or hidden costs that you don’t see until closing. To make the most informed decision, make sure you compare apples to apples.