No Cost Loan vs. No-Cost Refi
First off, lets make this article a bit shorter and easier for us to get through. The concept and process for a No Cost Loan and a No Cost Refinance are the exact same. Both were created to accomplish the same goal… NO COST TO YOU OUT OF POCKET! If the market is really dropping down and taking the rates with it, get a No-Cost Refi. If the homebuying market is out of control and everyone is looking to buy a home, then get yourself a No Cost Loan. No-Cost products are an always and forever product. They’re never out of style.
How does a No-Cost product work?
No Cost loans are a huge factor for companies to offer. Why? Because they can advertise the crap out of them. What is the number one most appealing thing to humans? Any guesses? …. FREE stuff!! Freebies, swag, “on the house”…., you get it. Knowing that it is built into human biology is going to make advertising that much easier. If you’re ‘buying’ a loan, would you rather pay for it or get it free? Of course we’ll take it for free. For some, you jump right in and take the loan, others may ask themselves, “what’s the catch?”. Let me help you understand “the catch”, so you can decide if it’s a negative or positive one. Spoiler alert, it’s a positive one!
What's the catch?
The catch is more of a trade off than a catch. Example, if you were to get a loan with a 4% Interest Rate, you may have $5,000 is closing costs. For that same loan, you could opt into a “No Cost” loan. This would take care of that annoying $5,000 you don’t want to pay in closing cost BUT your new Interest Rate will be 4.25%. Its all a game of moving money around. In the end, you’ll pay that $5,000 one way or another. The first scenario you will pay it up front and get it out of the way while having a lower payment. For the No-Cost Loan you will be paying that over the life of the loan through a higher interest rate.
“The Catch” should not be looked at as negative, it is a positive one. It can really help people that have no problems making monthly payments, yet, don’t make quite enough to save up a chunk of cash to put down for a home. For others, even if you have a down payment but could but that cash to better use elsewhere, it gives you’re the option to pay a little bit more each month to do so. Countless times our loan officers have given second bids/quotes to home buyers to see if we could save them money. Not only have we offered far better rates, we end up offering them a No Cost Loan with a rate that either beats or is equal to the rate of their previous standard quote. It’s safe to say, these loans are incredible products and can possibly get better with different situations.
How the heck do I get one?
All you need to do is give us a call, tell us your current home buying scenario, then let us take it from there. We will be able to run through a few different loan options and make sure to get you the best products for you to choose from. Whether you’re looking to build a new home, buy a condo down at City Creek, or purchase an existing home. ALWAYS get a quote from another mortgage lender to make sure you’re fully satisfied and taken care of.