What IS The Truth About No-cost Loans?
How Do They Really Work? Jumbo Rates?
Q: Last week I read an article that sounded critical of your no-cost loans. He said that the borrower pays hidden fees for a “no-cost” loan. What is really true about “no-cost” loans?
A: I can tell you a few really important facts regarding no-cost loans:
- The interest rate on a no-cost loan is about ¼% higher than a loan with no points and generic closing costs of approximately $3000. On a $400,000 loan the difference in payment is $55 per month. If it costs $3000 to save $55 per month it takes 54.55 months to break even on the cost and really start saving. Who wants to wait 55 months to start saving $55 per month?
- Lenders who criticize no-cost loans usually do not want to do no-cost loans because they often want to charge higher fees and those higher fees that they want to charge are harder to fit into the format of the no-cost loan, hence their propensity to criticize and warn against them.
- Where you get your no-cost loan can make a big difference. Lenders who are happy to make a smaller origination fee offer no-cost loans with lower rates. Lenders with higher fees that they will not compromise on must offer higher rates on no-cost loans in order to collect the higher fees that they want to charge.
- During recessions, many borrowers can refinance every 5-8 months and lower their rates at no-cost over and over. In so doing they achieve the rates that many people pay fees to obtain-sometimes MUCH HIGHER FEES. I rarely advise clients to pay fees on a mortgage when they are saving a very reasonable amount and their loan amount is large enough to maintain an acceptable savings and pay only a bit more in payment rather than paying $3000.00 or more in cost and not actually saving anything for almost 5 years. FYI: lenders who want to charge higher fees often do not offer no-cost loans or they present a break even period between no-cost and no points loans to borrowers that is longer. Either way, as I say in #3 above, where you get your no-cost loan can make a difference in how much sense it makes and how many dollars it actually costs in terms of a higher rate.
- My advice is to call me at 831-818-7700 or send email to firstname.lastname@example.org to hear what I have to offer in terms of break-even periods, true savings and full disclosure on no-cost and NO POINTS mortgages for refinance or purchase.
Q: How low a rate can we get on our $1,000,000.00 loan?
A: Depending on the loan to value, credit score and other individual factors as low as 3% a.p.r. to 3.25% a.p.r. and I encourage you to call me about NEW LOWER RATES ON JUMBO LOANS and get specific information on opportunities that apply to your situation.