No Closing Costs

What is a rebate/negative point?

Homeowners Mortgage offers its customers more options than most lenders, including a rebate (or negative) point option.  A rebate point is a credit from us to you at closing equal to that percentage of your loan amount. A 1 point rebate would give you 1 percent of your loan amount back at closing to help cover your closing costs. You can use this credit to cover your mortgage-related closing costs such as title insurance, appraisal and lender fees, in exchange for a slightly higher interest rate. Please note that you can't get cash back from rebate points.

What's a "no-cost" loan?

A no-cost loan has enough rebate points to cover all your estimated non-recurring closing costs in exchange for a higher interest rate. For example, you need one rebate point to cover $1,000 in closing costs for a $100,000 loan [1% X $100,000 = $1,000]. The smaller your loan amount, the more rebate points you'll need to cover your loan costs.Please keep in mind that you still have to cover the non-mortgage related closing costs, such as your escrows. These items include the initial 4- 6 months of property taxes and the first 2 months of hazard insurance.

Why should I consider a "no cost" purchase loan?

A no-cost loan will help you free up some money for your down payment. If you have enough income to make the monthly mortgage payments, but you're strapped for cash to pay for closing costs, a no-cost loan may be a good option.

Again, you need to consider how long you plan to keep the loan. You can save money with a no-cost loan, if you hold onto it for a short period. For example, if you buy a home to fix and sell next year, a no-cost loan allows you to conserve money to use towards the renovations or pay off higher cost debt such as credit cards. The longer you plan to own the home, however, the more sense it makes to pay one point or more to get a lower rate.

Homeowners Mortgage has quite a few borrowers who choose this option when making an initial 5% down payment but expect to have more money available in the future to pay down the loan. This allows them to acquire the property initially with the cash on hand and then pay the loan down and refinance to remove the mortgage insurance.

What are the benefits of a "no-cost" refinance loan?

This is a "no brainer" if your current rate is higher than the current no-cost rates. You realize an immediate savings from our new loan because your new lower interest rate and resulting monthly payment have not cost you anything to obtain. If you find yourself in this position contact us immediately. Go back to the main page and click on the Help link to send us an email.

For example, if you get a refinance loan at no cost, and your new monthly payment is $100 less than your current loan, you benefit from these savings right away. On the other hand, if you pay $1,200 in closing fees, it would take 12 months before you recoup these costs and begin to save [$1,200/$100 = 12].

Keep in mind that a no-cost loan makes sense if you stay in your home for the next one to three years. Any longer than that, you should strongly examine paying points up-front to get the lowest rate, which will save you more money in the long run.