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Lately, I’ve been getting a lot of questions about these so called, “no-cost” mortgages. The advertisements for these mortgage products usually look something like, “Lower the monthly payments on your mortgage without paying a dime!” With interest rates about as low as they get and home values also holding, many consumers aren’t sure who to believe. In fact, there is so much uncertainty about “no-cost” mortgages that I wanted to bring in an expert.

On a daily basis our resident Mortgage Professor, Jack Guttentag, helps mortgage hopefuls accomplish their goals. It is not surprising that he has some excellent advice on no cost mortgages:

“Don’t Confuse No-Cost with No-Cash”

This is one of the worst mistakes a borrower can make. “No-cash” means the borrower does not have to pay the settlement costs at closing, but the lender doesn’t pay them either. The costs are added to the loan balance, so the borrower pays them over time, with interest.”

Also remember that not all costs are rolled into the mortgage. Transfer taxes, escrows, and even homeowner’s insurance will need to be picked up by the borrower. Are you starting to get a better idea of what “no-cost” really means? I hope so.

Finding the right mortgage product is never easy, but luckily you don’t have to do it alone. Professionals like the Mortgage Professor are always around to help. Using the resources you have will always help you make the best decision.

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