Why a no closing cost mortgage is the right option when mortgage rates are high. Recent data shows that today’s elevated mortgage interest rates are a factor in the slowing housing market. But even in times like these, people still buy homes. Those in the market for new home financing must consider a no closing cost mortgage. Here’s why.
No closing cost mortgages are traditional mortgages, including conventional, FHA, VA, USDA, and jumbo loans. The defining characteristic is that the mortgage company pays the typically required closing costs in exchange for a slight increase in the interest rate. The closing costs are not financed into the loan, the mortgage company pays them on the customer’s behalf. For more detail on no closing cost mortgages, click here: https://www.gonocost.com/resources/home-mortgage-no-closing-costs/.
No closing cost mortgages may have slightly higher rates than loans with points and closing costs. If current rates are so high to begin with, why would someone take a rate that’s even higher? The reason is that interest rates are cyclical in nature. They move up and down based on numerous factors. The action of the Fed is one of the most influential.
When the Fed alters the Fed Funds Rate, other interest rates tend to move similarly. Mortgage rates anticipate these Fed rate moves rather than react to them, moving higher or lower well in advance of actual Fed activity. Mortgage rates moved higher before the Fed embarked on its recent rate hikes. Many people believe the Fed is nearing the end of its rate hiking cycle and may push the economy into recession. If that happens, the Fed will likely start cutting rates again. The mortgage market would anticipate this, and mortgage rates would move lower.
It’s this cyclical movement that argues for a no closing cost mortgage. If rates move down from their current levels, homeowners with today’s rates will want to refinance to lower rates when they become available. Nobody can predict the future, but 30-year fixed rates dropped to under 3.00% in 2012 and 2020/2021 and rates are now near the highs of their range over the last twenty years. It doesn’t make sense to pay thousands of dollars in closing costs for a mortgage that the homeowner will want to get out of as soon as rates improve? Go with a no closing cost mortgage and save all that money that would be spent on closing costs. Then be ready to refinance whenever mortgage rates allow. See our recent blog post on closing costs here: https://www.gonocost.com/resources/how-much-does-it-cost-to-refinance-home/.
GoNoCost Mortgage, a division of Gold Star Mortgage Financial Group, Corp., is a Raleigh, NC based mortgage lender specializing in no closing cost mortgages. Online at https://www.gonocost.com/. Gold Star Mortgage and its affiliates are licensed in most states. https://www.goldstarfinancial.com/CompanyStateLicenses. NMLS #3446
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Company Name: GoNoCost Mortgage
Contact Person: Skip Dyer
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Phone: 919-205-4017
Country: United States
Website: https://www.gonocost.com/
