Understanding No-Cost Loans

How they work, and why they could be good for you.



Yes, it is definitely possible to secure a mortgage without having to pay the closing costs—all fees legitimately incurred, such as title, underwriting, appraisal, et cetera.   If you have further inquiries, feel free to contact us today. We will be more than glad to be of service and answer your questions to your satisfaction.

(NOTE: City Creek Mortgage charges no closing costs. Our company is 100% compensated by our investors, not by our clientele, on a fixed income basis.)

The Truth About No-Cost Mortgage Loans

Every time I recommend no-fee mortgages to our clients, I often meet the question how it is possible to purchase or refinance a house loan minus the closing costs. Of course, a mortgage without such fees seems too good to be true, and so many tend to be skeptical.

To clear any doubt and shed more light on this type of house loan, we provide a detailed explanation on how a no cost mortgage in Salt Lake City, Utah works and the unique benefits it offers.

No-Fee Mortgages Explained

A case study

Obtaining a mortgage always involves certain fees. Appraisers, title companies, and underwriters all charge money for their services.
The total cost of these services is on a typical $225,000 loan is roughly $2,460.

Connected to each interest rate, there is either a credit or a cost. Interest rates that offer credit will use that credit to cover the basic closing costs. If your rate credit is equal to or greater than the basic closing costs, then all of the fees incurred are covered, rendering the mortgage a No-Cost Mortgage.

A 3.75% rate may associate a cost of 1% of the total loan amount.

Cost for an Interest rate of 3.75% $2,250
Flat Closing Costs $2,462
Total Closing Costs $4,712

A 4.125% rate may offer a credit of 1.125% of the amount of the loan.

Credit for an Interest rate of 4.125% ($2531)
Flat Closing Costs $2,462
Total Closing Costs ($69)

Total Difference in closing costs: $4,712 – ($69.25) = $4,781.25

No-Cost Mortgage Benefits

When it comes to comparing mortgages involving closing costs with no-cost loans, the amounts must be adjusted to reflect the cash needed at closing equally. In other words, if there is a difference in mortgage costs between the two options of $4,781, the no-fee option will have an amount that is lower than $4,781. This way, it will effectively show the actual cost of shouldering closing costs to get a lower rate. Therefore, we would compare a loan amount of $229,781 at an interest rate of 3.75% against a balance of $225,000 at an interest rate of 4.125%.

Full-Fee Option :

$229,781 @ 3.75% has a P&I payment of $1,064.15

No-Fee Option:

$225,000 @ 4.125% has a P&I payment of $1,090.46

By paying a closing cost of $4,781, the monthly payment will be $26.31 lower than the no-cost loan.

The breakeven point will be 181 months  ($4,781 / $26.31 = 181.71 months).

If the loan is scheduled to be paid in at least 15.1 years, then paying the lower rate fees may be the right route to take. However, that is highly unusual, and does not account for the option to decrease the interest rate again if the rates continue to drop without losing the amount paid for the mortgage. It also does not take into consideration the additional tax rewards of a higher interest rate a no cost mortgage in Salt Lake City, Utah brings.

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