Not Your Forever House? Do A Zero-Cost Mortgage.

Most first-time home buyers don't stay in their house for much longer than 6 years. Doing a zero-closing cost mortgage can be smart way to keep your cash handy for furniture and home improvements.

June 09, 2020 by Dan Green

You don’t have to pay closing costs with your upcoming mortgage. It’s not a trick and it’s not a scam – it’s smart financial planning.

First, some background.

Mortgage closing costs are the fees that come with getting a loan. They cover the cost for the people and technology that make your home loan possible.

Mortgage closing costs can be paid in three ways. The first two are basic strategies:

  1. You bring extra money to your home closing, and pay the costs in cash
  2. You get the home seller to pay your costs through seller concessions

The third strategy is more advanced. It’s also the best possible option for a lot of home buyers who don’t plan to stay in their new home for the next 30 years.

Option 3 goes like this:

  1. Accept a higher mortgage rate from your lender
  2. Have your lender pay your costs on your behalf
  3. Make a larger monthly payment on your loan

In general, every 0.25 percentage point increase to your interest rate yields a credit equal to one percent of your loan size that you can use toward closing costs.

In a real-world example: When your loan size is $300,000, an interest rate increase of 0.25 percentage points raise your mortgage payment $44 per month, and gives $3,000 to apply towards your closing costs.

If you’re going to move in the next few years, it often smarter to pay the extra $44 per month as compared to bringing a $3,000 more to your closing.

Are you a first time home buyer?

Let us know if you’ve done this before - whether you’re a seasoned pro or buying for the first time. We’ll share the perfect information with you as you need it.

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