NO COST LOAN DOES NOT MEAN NO COST AT ALL

2007-03-08 10:33:40

( Financial )



Don’t be fooled by the cost loan offer you see on the internet or advertised on television. The loan surely includes cost. It may not be charged during the application process but it will surely be included in your future loan repayments.

A true no cost loan occurs when the lender does not collect any fees and also pays for the settlement fees on behalf of the borrower. However, in reality a no cost loan actually charges you higher interest rates. It’s the lenders way of charging you back the costs it initially covered during the application and settlement process.

A no cost loan will be a good deal for the borrower if he plans to retain his mortgage house for at least two to three years and is not planning on hedging on the mortgaged property. It might not be financially sound investment if you plan to retain your mortgage house for longer than three years.

Borrowers are advised to shop for lenders providing no cost loan. Verify with these lenders what they meant by no cost loan. It might mean no zero points where you are responsible to pay other fees and other third party cost. It might mean no zero fees which makes you responsible to pay cost related to third parties. It might mean no cash which makes you actually responsible to pay for the cost which the lenders will include in the amount of loan that you will pay.


Lenders have many ways of packaging a no cost loan. Borrowers need to be aware of the manner lenders package such loan to be able to identify what loan cost they will be incurring in availing a no cost loan.

In the end, its how the lender define the no cost loan that matters to help borrower decide whether to avail of such lender’s offer or to find another lender that has a more appealing definition of no cost loan.


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