No Cost Mortgage

No Cost Mortgage

• A no cost (or “no point, no fee”) mortgage is the most common way to refinance in today’s market.
• Here’s how it works. Every refinance transaction has real costs associated with it. These costs include title, escrow, credit report, notary, appraisal, etc. The question is: Who pays for these costs? The real answer is that the borrower always pays these costs, either directly at closing or through a slightly higher interest rate on their loan.
• Let’s see an example:$300,000 Loan Amount
  = All fees add up to $3,000
  Rates for that day:
  4.250% (1.00) credit
  4.125% (.500) credit
  4.000% 0.00 <—”par” rate
  3.875% 1.00 Discount points
  If the borrower chose the 4.000 par rate, then they would have to pay the $3,000 in closing fees. If they chose the 3.875 discounted rate, they would pay the $3,000 plus 1.00% of the loan amount in exchange for the below-market rate. If they didn’t want to pay points OR fees, then they would choose the 4.250% rate, which would give them a 1.000% credit of $3,000 to offset the $3,000 in fees.
  
  More about me here:  www.MyMortgageGuyTOM.com

No Cost Mortgage