BOULDER, CO, Mar 28, 2017—“No-cost” and “no-fee” loans; you likely see promotions for them all around. Are these loans the real deal, and should you consider one if you’re looking to buy a house or refinance?
The answer is not such a simple one. While there are loans that technically offer no upfront fees, these loans are often misrepresented, according to Phil Boren, Broker Associate of RE/MAX of Boulder, Inc., who says that banking regulators have gone after lenders who misrepresent these loans.
While they may sound great at first, the reality is that no-cost and no-fee loans may actually cost the borrower more over the long term because costs are often hidden by rolling them into the new loan through higher principal or interest, explains Boren.
The rates on no-cost loans are usually about 1/2 or 5/8 of a percentage point higher than the "full cost" rate.
So how does it work? “A typical no-fee loan includes points and all fees in the loan principal, so the borrower does not pay or “see” these expenses at the closing,” says Boren. Instead, the borrower pays them over the life of the loan.
If you are looking to refinance, it may be possible to get a no-cost program that will lower your rate at no expense to you. Today, lenders are paying all closing costs, such as title fees, appraisal fees, and credit report fees. There are no loan fees or points, and nothing is added to your loan balance.
“However,” says Boren, “many lenders may charge a loan application fee and some restrictions may apply depending on the size of the loan.”
For more real estate information, please contact RE/MAX of Boulder, Inc. at firstname.lastname@example.org, 303-441-5647, or RE/MAX of Boulder, Inc..
Phil Boren is a 26-year veteran real estate Broker and Realtor, specializing in consulting with buyers and sellers in Boulder, CO and along the Front Range of Northern Colorado. Held Real Estate Broker's license in Texas, California and Colorado; Managing Broker for over 200 agents and Brokers for Century 21 and RE/MAX franchises. Award-winning Realtor with experience in management, sales, marketing, relocation, appraisal, REO, BPO's, foreclosures, short sales; previously held the MAI designation from the Appraisal Institute. Experienced in both residential and commercial real estate and achieved the No. 14 individual ranking in the 5-state, Mt. States Region for RE/MAX International in 2001, based on sales volume. Received my BSBA in Finance and Real Estate from the University of Arkansas in Fayetteville, where he was a 4-year starter and 4-year football letterman for Hall-of-Fame coach, Lou Holtz.