In many states, real estate regulatory agencies
are cracking down on such advertising. The
very term, "no-cost" loan, is
misleading because borrowers are actually
paying a higher interest rate in exchange
for not having to pay fees or closing costs
up front when the loan is secured.
A "no-points"
loan is one for which the lender does
not charge points (one point is equal
to 1 percent of the loan amount). But
there are other fees involved in no-point
loans, as with most loans.
Q:
Is
there such a thing as a no-cost or no-fee
loan?
A:
Not really. While some lenders occasionally
promote "no-cost" loans, banking
regulators have cracked down on these misrepresentations.
Advertised "no-fee" loans may
actually cost the borrower more over the
long term because these costs are often
rolled into the new note through higher
interest or more principal.
A
typical no-fee loan is one where the points
charged and all fees are included in the
loan principal, meaning that the borrower
does not pay these expenses at the close
of escrow, but instead ends up paying
on them over the life of the loan. The
loan is called a no-fee loan because the
borrower is not charged any fees up front.
Copyright
2006 Inman News Features
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