Danny Salas

Archive for September 6th, 2009

No Cost Loans…Que Paso?

Don't Get Suckered Into No Cost Loans

The Good ‘Ole Days

Remember the true, no cost loan?  The rate was almost as low as the full cost loan…Well, those days are gone.  Anyone offering a no cost loan, these days, is just using an old marketing tactic that might make the phone ring, but is it really a smart thing for a home owner to entertain?  Let’s take a look…

Plenty Of Business To Make $ On The Next Loan

Before the Mortgage Credit Crisis, banks could afford to offer loans, like “no cost loans,” because there was so much business, that if the home owner happened to pay off the loan by refinancing or selling, nobody cared…there were, simply, plenty of other loans out there to make the bank more money. 

$?  No Mas

These days, things are different.  After the colossal losses to lending institutions in the United States and world wide, banks just cannot afford structuring a loan, paying people to process the loan and set it up for monthly payments, to not have an opportunity to make interest on that loandue to an early pay off.  So, instead of no cost loans being closely priced the same in interest rate as full cost loans, that spread has grown exponentially.

What To Do

Probably the best scenario, is to actually pay a point, to get the market’s best rate.  If you’re in a purchase transaction, take advantage of the opportunity, in today’s buyer’s market, and have the seller contribute to your cost of purchasing the home.  It completely makes “cents.”