A no points no closing cost loan or a loan with a lower interest rate loan, which is a better deal?

The best choice for a borrower when deciding most questions regarding mortgage rate and term options depends on the market and the borrower’s goals.  The first issue regarding the market is a reference to the market for mortgage rates.  Before making a decision a borrower must know what the mortgage interest rate options are.  In some cases the difference between the rates on a no point no closing cost loan is significantly higher than a traditional mortgage with closing costs.  A no cost loan will always have a higher interest rate compared to a traditional home loan, sometimes the spread between the two rates is minimal other times it is cost prohibitive.  The loan amount will have a big impact on the value of a non closing cost loan.   The second consideration is your goals.  Do you have a goal on how long you intend the have the loan for?  Do you have a goal on how much money you want to have available to take out the loan?  The easiest process to answer these questions is to use a mortgage calculator that compares a no cost loan to a traditional home loan.  Enter the current mortgage rates for both products and let the mortgage calculator calculate the monthly mortgage payment and the amortization schedule for both types of loans.

This entry was posted on Wednesday, December 10th, 2008 at 9:02 pm and is filed under Mortgage FAQs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.