What is the no-points, no-fees home
financing advantage?
Many lending institutions advertise No Points and No Fees.
This is a gimmick that is used to trap consumers into thinking that
no points and no fees means just that. The
truth is that most companies that advertise that will generally have the
points and fees built into the actual interest rate.
A common mistake made by consumers is to shop the interest rate
rather than the Annual Percentage Rate (APR).
The APR is going to determine the true interest rate, which is the
effective rate factoring all the costs associated with getting the
mortgage.
Maybe you are thinking of
refinancing but you think rates are going to decline some more this year.
What should you do? Suppose
you have a $250,000 adjustable mortgage with a lifetime cap of 10%. Your
monthly payment can go to $2,193. Your
current adjustable rate is 7.5%, the monthly payment is $1,748 and may go
to 8.5% during the next year, your payment will increase to $1,922.
The No-Point, No-Fee Advantage: If
you can refinance your home at 7.875% with a payment of $1,812 fixed for 7 years,
you can avoid the risk associated with an adjustable rate. If rates
fall, you can refinance once again. Why?
By not paying the loan points and closing costs out of your pocket
you have the financial flexibility to refinance once again if interest
rates continue to go down. Your new
rate of 7.875% cannot go any higher for 7 years but if rates fall to 7.5%
or 7% you can refinance again and continue to lower your monthly payments
without spending anything. The
No-Point, No-Fee loan program is a quirk, which solely favors the borrower
in a declining rate market. This is
an opportunity to actually "get something for nothing."
Landmark Mortgage
specializes in assisting individuals with obtaining home loans.
We can advise you on the best
approach and help you get the house of your dreams!
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