Closing Cost Magic Trick?

One of the more popular loans is the 30 year fixed "NO closing cost loan". Some lenders want you to think it's a magic trick. Here's how it works.. the loans come at a slightly higher interest rate and then the lender pays your closing costs with the bonus they get by quoting you a slightly higher rate than a regular loan. For example, let's say you have a $400,000 loan at a 5.75% interest rate. If you refinance to a 4.75% rate, it would save you about $248 per month. If the closing costs would then be $5,800 it would take about 2 years to break even. However, on a NO closing cost loan, instead of saving $248 per month you would save about $187 dollars a month, but there are no costs, so the break even point is immediate. With the no closing cost loan, since there is no cost, you can refinance even if the rate only drops just a small amount, because there are no costs involved for you to pay at all.. Nothing! So now you know the truth behind the "No closing cost" loans! Remember, you can use this strategy for buying or refinancing your home and you can always count on me to give you honest, helpful information. If you'd like to see which method is best for you, give me a call!