Financial Facts: No points, no fees, no way
I almost drove of the highway today as I heard a Front Range radio advertisement stating that their mortgages had no points, no fees and was no cost. All I have to say to that is No Way. If they are in business to provide mortgage services they are already out of business if they are doing mortgages at no cost. It just does not happen; at least it does not happen intentionally. Plus, I have heard that some mortgage companies will give you a free credit report or discounted appraisal. Once again, No Way!
I always remember the statement “There is no free lunch”. Ask your self the question “Would you work for free”. I would guess that you would prefer to work and be paid accordingly. So how are these lenders getting you the mortgage at no cost? They are not!
First off you need to know that there are a half dozen professions involved in the mortgage process. There is the mortgage professional, the real estate appraiser, the title company and some times a land surveyor. All of these professionals want and expect to be paid for their services. So how does one advertise a no cost mortgage?
A no cost mortgage has simply hidden the fees into the loan itself. The mortgage professional will go to the final investor and negotiate a higher interest rate and have the investor pay them directly. The borrower will see little to no fees on the settlement statement and thus think that the mortgage lender is such a wonderful person. They provided the loan for free.
As an example, a borrower is looking to finance a new purchase with a $250,000 mortgage. If the borrower would pay the fees outright the interest rate on a thirty year fixed mortgage would be five percent. If they want to take advantage of no fees the interest rate on the same mortgage would run a minimum of five and three eights percent and most likely it would be five and one half percent. Over a five year period the one-half percent difference in rate will add up to almost $5,000. These dollars show how much you could save if you went with a conventionally funded mortgage where the buyer pays the fees upfront.
An even more evident way a mortgage lender can charge you and you will never know it is when you refinance your current mortgage and you roll all of your costs into the mortgage. Here an unscrupulous lender can hide their fees and you not only get a higher mortgage interest but you also have a larger principal owed. So in this scenario you get taken two ways.
So first of all remember that the costs associated with your mortgage must be paid and you can pay for them once or you can pay for them every month in your monthly mortgage check.
For answers to your mortgage related questions call Bob Kieber are (970) 262-1199 or e-mail him at firstname.lastname@example.org. Bob is a local mortgage lender and principal of Resort Lending. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.
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