Hollywood-California. Closing Cost. Zero Closing Costs.
Many articles have been written on the above topic. Banks, lenders advertise huge on the above topic. Mortgage experts have a view both pro and con.
The objective is to make the borrower understand the maths behind the concept of NO Closing Cost, Zero Closing Cost and No Points etc.
Mortgage is maths. It’s pure numbers and how you apply maths to manage the California mortgage borrowers finances, short and long term.
California mortgage borrowers traditionally are very active when it comes to refinance. A .25% drop in rate and California mortgage borrowers are looking to refinance. Traditionally speaking if you have a conventional mortgage. Your closing cost on an average would be about $ 4000 give or take.
Where the mortgage expert senses that the market has the potential of coming down in terms of interest rate. In order to secure the lowest mortgage rate for his California mortgage borrower. The mortgage expert may suggest to the borrower to go for no closing cost.
What that means is that if the borrower chooses to go with cost of $ 4000 that shall either be added on to your mortgage balance and you would pay 4.5% let’s say as interest rate. If the borrower chooses to go with no closing cost the mortgage expert will offer him let’s say 4.625%. The difference in the rate helps the bank recover its cost.
The advantage to the borrower is that the principal balance doesn’t move up. So if in 7-8 months rate does come down. Mortgage expert can call him again to reduce the rate. However if the borrower goes with closing cost of $ 4000 and even if the rates come down he may not be tempted to go for another refinance even though lower rate would help him in the long run because from a borrowers perspective he would look that he paid 4000 6 months back and now paying another 4000.
Like I said this is pure maths. It’s not a sham. There is nothing secretive or hidden about it. Borrowers neighbour may have 3.5% and the borrower in today’s market is not qualifying for that rate as it doesn’t exist. It makes sense to refinance several times without cost until the borrower gets his desired lowest rate.
Those who have rates like 3.5% didn’t get the rate the very first time they applied for the mortgage. They went for 4% and when the rates came down they went again for 3.75% and then again 3.5%.
Back in 2010 a mortgage borrower was refinancing his house every 6 months and there are borrowers who refinanced their home 4 or 5 times because each time the rates came down they wanted a no cost loan so that if tomorrow the rates come down again they were ready to do it again.
For more information visit www.affordable-payment.com or call 323-705-3191 if you are a California Mortgage borrower or If Texas Mortgage Borrower call 713-463-5181 EXT 154.
Artical by Roger Shanker
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