No Cost MortgagesPosted by Nick Niesen on October 29th, 2010 When you are dealing with mortgages, it is important to check twice the calculation as well as the English when the lenders specify the word ?No cost Mortgages?. The fact is that no cost mortgage means it will cost something, now the question arises in your mind how much it cost the answer is the cost depends on what kind of mortgage you plan to go. There are two types of basic cost involved while getting mortgage, In one type of cost the lender cannot control that includes the appraisal cost, filing fees, title search, attorney fees etc, and the next type of cost is the lenders cost that is loan application fees, credit check, admin fees and processing fees etc, with out which nothing is possible. To few lenders no cost means they do not want any cost from their pockets, all the cost will be added in the loam amount, for instance the loan cost is $5,000 and you plan to borrow $150,000 in this case the $3,000 gets added up with the loan, and ultimately you will be borrowing $1,53,000 that is with interest for the entire amount. In this case when you take 30 years loan at 6.25% rate interest the monthly interest with principal is $942.05 and the interest is $18.47, which is $18.47 per month more than $923.58 you would make on $153,000. You may not realize you are paying interest for $3,000 every month until you clear the entire amount, in addition to that this $3,000 wont be paid off till the 20th month of mortgage well into the subsequent year its only after 19th payment that the principal you owe will reduce below $150,000 to be exact $149,948.25. How does this sounds to you, this is the way no cost mortgage works, you pay accumulated interest on unpaid balance of the loan every month and to pay off the $3,000 In some cases you may not pay any cost in the beginning but you will end up paying with closing cost and sometimes the lender will take in charge of paying all the cost like application fees, commission, attorney fees and then in turn charge the borrower with high interest rate. By this time you could get a clear idea how much it will cost you for no cost mortgage Like it? Share it!More by this author |