No closing cost mortgages are typically desirable to borrowers with few funds to bring to closing. The phrase is a bit misleading as there is always a cost to lending money. However, the way those expenses are recouped by a mortgage company can be accomplished differently. Below is an explanation of Exeter NH no closing cost mortgages, what you should be aware of, and how it compares to other types of loans.
Definition of No Closing Cost Mortgages
Fees apply to every loan because lenders have expenses related to processing mortgages, compensating brokers, etc. In a typical loan, the exact charges are outlined and listed as closing costs. This results in more money due at closing, which may be a challenge for all home buyers. No closing cost mortgages were created to minimize this issue.
There are two different ways that mortgage companies are able to provide no closing cost mortgages. One method is to apply a higher interest rate, which allows them to recoup the fees gradually. The second is to include the closing fees into the amount of the loan.
Benefits And Risks
Deciding whether to use no closing cost mortgages should depend on several considerations. If you intend to refinance your mortgage within a few years, then it can be beneficial since you would be paying the elevated interest rate for a limited period of time. This can be true during times where interest rates are high but are expected to decrease in the near future or if you plan to sell your home in a few years. Alternatively, if you plan to hold a loan for an extended number of years, then the expense of a higher interest rate over the years will be much higher than merely covering the closing costs now.
It is important to understand that no closing costs does NOT mean that money is not be due at closing. Closing costs describe only certain charges. Other items, such as escrows, are actually pre-paid expenses. They are not put in the closing costs classification and may therefore still be required at closing.
Exeter NH No Closing Cost Mortgages
Exeter NH no closing cost mortgages may or may not be the optimal solution for your particular situation. To make an informed decision about what type of loan works best for you, evaluate both the interest rate and closing costs of each loan. Also think about how long you expect to keep the mortgage and the the long-term impact. Most of this information may be found on a good faith estimate provided by lender.