no-cost loan

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Cindy

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PostPosted: Mon Oct 24, 2005 2:03 pm    Post subject: no-cost loan

What are the things that are paid by the lender and what things are not paid in a no-cost mortgage?
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Joined: 21 Oct 2005

Posts: 1138
Location: MARYLAND
137.84 Dollars($)
PostPosted: Mon Oct 24, 2005 2:26 pm    Post subject:

Hi Cindy,

In a no cost mortgage generally the lender pays the borrower's settlement costs, but following things are not covered within it-

  • The interest from the closing date to the first day of the following month. Instead this has to be paid by the borrower.

  • Escrows for taxes and insurance, that are set aside to ensure payments of the borrower's future obligations.

  • Homeowners' insurance is not included.

  • Transfer taxes, if any, are not covered.

With exceptions of these as stated above, all other costs, including the mortgage broker's fee is paid by the lender.

Hope I could help you with this information.

Regards,
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Cindy

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PostPosted: Mon Oct 24, 2005 2:43 pm    Post subject: no-cost loan

Are they a good deal for borrowers like me?
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Samantha
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Joined: 16 Sep 2005

Posts: 1602
Location: MASSACHUSETTS
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PostPosted: Mon Oct 24, 2005 3:13 pm    Post subject:

Hi Cindy,

It depends on your requirement. Usually no-cost loans are not considered good for the borrowers as these mortgages don't eliminate costs as apparently it may seem. They only convert them from being paid upfront to being paid over a certain period of time.

No-cost mortgages have higher interest rates. The rate is estimated by the lender who includes the cost for which he will be responsible. So, depending upon the requirements, it may be good to some borrowers but not for others.

Generally borrowers, who have shortage of cash or don't intend to keep the mortgage for long, go for a no-cost mortgage. These loans are not helpful particularly to borrowers who want a mortgage for a long period as longer the period, higher will be the cost.

Borrowers are unable to see the negative aspects of no-cost rates as they are not mentioned in the ads, nor are discussed by the loan officers.

So, if you require a no-cost loan, at least try to negotiate with your lender and shop around to see if you can increase some advantage to your side.
For some more details on no-cost mortgage kindly refer no-cost/no-cash.

God bless you.

For MortgageFit,
Samantha.
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