With mortgage rates continuing on a downward trend, the competition in the business is fierce. A day never passes that I don't hear some crazy advertisement about a new loan program that XYZ mortgage company has and no one else offers. One of the oldest programs remains steadfast in both its high profile and its duplicity. This program is the No Cost Home Loan -- the one bankers say is free, but you actually pay for as long as you have the loan.

The no closing cost home loan is virtually everywhere. It is advertised in the mail, on radio and on TV all the time. "Hey, refinance your loan today, and there will be no closing costs," the ads scream. Wow, a free loan. Imagine the money you'll save. So, if you are in the market for a refinance loan or home equity line, which you probably should be, with rates at all-time lows, you might consider running to XYZ mortgage company, who is now offering free mortgage loans.

Just be careful you don't go bankrupt, along the way. Remember, the old cliche, Nothing in life is free, because it makes a lot of sense. You actually can get a mortgage with little or no closing costs. What bankers don't tell you (one of their great secrets) is that you pay a higher interest rate than you really qualify for, when you get your loan for "free." So, you might save $2,000 or $3,000 in closing costs, but your monthly payment could be $100 to $300 higher than it would have been if you had actually paid the costs.

Imagine taking this loan and saving $2,000 in total closing costs. Perhaps you borrow $200,000. Now, if you simply pay all the costs and tell the banker you want the best rate available, let's say it is 6% for this example, you would have a monthly payment of $1,199. Now, let's assume the wiley banker convinces you to pay no closing costs and take an in terest rate of 7%. He might say, "Now, your interest rate will be a bit higher, but you'll save $2,000 in closing costs." Sounds great, you might think.

What he doesn't do, though, is spell out the difference in the 6% rate you could qualify for, versus the 7% rate you choose to take for your "free" loan. If you borrow $200,000 at 7% interest, your monthly payment is $1,330. This is $131.00 more each month than you will pay on the same loan at 6% interest.

If you choose to pay the closing costs and save $131.00 monthly, it will take you 15 months to get your $2,000 in closing costs back. Now, if you keep this loan for five years beyond that first 15 months, you will save an additional $7,860 at the 6% interest rate. If you listen to the crafty banker, selling the No Cost Loan, you'll allow nearly eight thousand dollars to drift right up your home's chimney.

Unless the difference in the interest rate on your no closing cost loan and the loan with costs is a tiny amount, say .125%, you are almost always better off paying the costs. Be sure to ask what the difference in the rates is. Then learn exactly what the total closing costs will be. Calculate the difference in the two monthly payments (one with closing costs and one without). If that amount will pay back your closing costs in two years or less, and you intend to remain in your loan for at least five years, pay the costs and take the better rate.

Use this method, and you'll never go wrong.

Check out more great loan information now at Direct Lending Solutions

Home Loan Center Does The Type Of Lender Impact The Type Of Mortgage You Can Get?
While deciding on the right lender, one should address the following questions: Does it really matter where you get your first mortgage? What is the difference between different types of lenders, and how does that impact on the mortgage you can get?T...

About Arizona Home Mortgage Loan Rates
When looking for the best Arizona home mortgage loan rates, it is good to know about the state's system to better educate yourself about the top places and people to go to.Figures and establishments that may aid you in mortgage loans:- The Department...

Oklahoma Home Equity Loans Finding a No Closing Cost Home Equity Loan
Home appreciation values in Oklahoma have done very well over the last few years. If you have a significant amount of equity built up in your home and need money for any reason, an Oklahoma home equity loan is one of the best ways to get it.No Closin...

Fast And Easy Home Equity Loan - Tips For Selecting Fast And Easy Home Equity Loan Companies
Shopping for a fast and easy home equity loan can be confusing and time-consuming. Mortgage packages and mortgage companies vary widely, and it is important to investigate several options to find the one best for you. The following tips will help you...

Mortgage Loan Most Bankers Won’t Give May Be Exactly What You Need to Buy or Refinance Your Home
A few years ago, a loan officer who worked for me was having a problem helping a customer. He was new to the business and had very little patience for problems (as you might have already guessed, he didnt last very long). He told me the customer was ...

A DIY Guide For Free Online Tax Preparation Services
Doing taxes is probably the single most dreaded thing that comes every year for many Americans. Many people choose not to deal with it themselves and they pay others to do their taxes by using expensive either computer software that you have to buy ...

Connecticut Home Equity Loans - How Much Will Your Home Equity Loan Cost You?
If you have managed to build up equity in your Connecticut home and you are thinking about taking out a home equity loan, you could be making a very wise decision. A Connecticut home equity loan is a great borrowing option for savvy homeowners. These...

New Home Loan - Understand The Various Types Of Mortgage Lenders
So, youve decided to buy a house, and youre ready for that all important next stepapplying for a mortgage loan. But where should you go? After all, the mortgage business is complex, and youve realized quickly that your choices for lenders are immense...

Comparison of Home Equity Loan Types
Before you decide which type of home equity loan to get, it helps to do a comparison. You should look at the two main types of home equity loan, a regular loan and a line of credit, and decide which one works the best for your situation. There are ma...

How to Choose a Low Interest Home Equity Loan
It's important to remember that there is more to a low interest home equity loan than just the interest rate itself. That is an important factor to consider, however, obtaining the lowest cost loan, requires you to look at the entire picture. Lenders...