No-Points No-Fees Home Financing Advantage!

 

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“No-Points No- Fees Home Financiing Advantage”.   Many lending institutions advertise No Point and No fees.  This is a gimmick that is used to trap consumers that think that no points no fees means just that.  The truth is 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 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 an $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 @ 7.875% payment of $1,812 fixed for 7 years you can avoid the risk associated with an adjustable and 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, say, 7.5% or 7% you can refinance again & 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."