Now that's the ticket.......  Just what we all need....Lower Mortgage rates and No Closing Ciosts.

And just where do you think that comes from?

         There is no free lunches and no free mortgages!

Someone has to pay for that! And in the long run it comes in the form of higher interest rates for our borrowers. So you ask "How does this work"? It is easy.....As all good lenders do, we must do what is the best thing for our customers?

There is always a cost to No Cost Loans. The cost comes in a form of higher interest rates. When lenders are paid, we are paid based on the amount of money a bank or mortgage company actually pays to buy that loan. For example, if 6.25% were paying the lender 101.5 or 1 1/2 points on the loan amount, then if you rasied the interest rate, the lender will get more revenue. And they can use that extra to either pay for partial or total costs for the borrowers or they can keep it and make more money.

What I have found is this is a science, not something we read in fortune cookies. And as I look to see what really benefits my borrowers, I look at what will it cost them in the long run. Now understand that most of the time, the borrowers do benefit from no closing costs loans. Many times, but not all the times, if you raise the interest rate, lenders will make about 1/2% additional in what we are paid for each 1/4 point. . If we do a mortgage for $300,000, we make about $1500 more which should raise the interest rate from 6.25% to 6.375%. That payment will go up from $1847 per month to $1871 per month. That would be an increase in their payment of $24 per month. 

Now simple divide the cost ($1500) by the amount of increase in payment ($24) and that comes out to 62.5. That is the of months it will simplify things, if the borrower will be there less that 62 1/2 months, they should pay the closing costs. If not, take the no closing costs.

It is simple and easy to figure out.

Did you know this? You can find it my my handy book of knowledge.
If you or your borrowers ever need to know how it works for them,  just call me & I will be glad to figure things out for you. My cell  number is 630-306-LOAN(5626).

You can easily find out payments on my website on my front page or get additional tools with my Fantastic Calculators.