No closing cost loans are available from a number of lenders in Greater Boston. Depending on your profile, needs and circumstances, “no closing cost” loans may be a good or a bad idea. Ultimately, consult your loan officer.
Closing Costs Involved in Mortgage Loans
Things which come under closing costs are:
Loan Origination Fee: Also known as an activation fee, it is the amount of money which one has to pay to establish an account with a lender. The fees usually varies between 0.5%-2% of a given loan amount.
Appraisal Fee: This is the amount paid to a professional to appraise your home. This is done to show the lender the real value of the house. The appraisal fee is usually $300-$400.
Title Search/Title Insurance Fee: This is the fee to be paid to purchase insurance which will protect the lender from unforseeable circumstances.
The total cost of all of the above fees can be up to $4000 which is no small amount. If you plan on staying in your house for many years it may be better to pay the closing costs up front rather than opting for a no-closing loan.
Characteristics of No Closing Cost Loans
- No closing costs
- Higher Interest Rates
- A good loan under certain conditions
When compared to normal loans where closing costs are paid, no closing cost loans will have a higher interest rate which can vary from 0.2%-0.5% over the regular rate. So while you may not pay the costs in one single payment, you will end up paying for it in small amounts over a period of time. It may not seem like much, but it translates into a greater total expenditure While the interest rate may be just high enough to allow the lender to break even at the end of the loan period, at times the rate could be high enough that you end up paying significantly more for your home over time. So make sure that you analyze the driving force behind your decision before you apply for a no closing cost loan. This type of loan may be the perfect loan for you under certain circumstances, but carefuly weigh your options.
At the end of the day, no matter which lender you choose in Greater Boston, you will have to pay for the above costs in one way or another. Just because you don’t have to pay the above costs immediately while closing the mortgage loan, it does not mean that you will never pay for it. The lender should tell you clearly that you are always still ultimately paying closing costs even on the “no-closing cost” loans. No lender will be able to bear the closing costs by themselves so, to cover the costs, lenders must always increase the interest rates of these loans by some percentage.
Lender Tip: We offer ‘no closing cost loans’ in and around Boston, and strive to make sure that it’s a win-win situation for everyone involved.