Borrowers elect "no-cost" loans for two reasons. They are either short of cash, or they don't expect to have the mortgage very long. Borrowers in the second group minimize their upfront costs because they expect to pay the high rate for only a short period.

No Closing Cost Mortgages can help people short on cash obtain a mortgage with no out of pocket expenses. However, borrowers should understand no closing costs mortgages will cost them more in the long run depending upon how long they keep the mortgage. Lenders offset closing costs by charging borrowers a higher interest rate. This higher rate adds tens of thousands of dollars to a 30 year loan kept the entire 30 Years. Which, when compared to $4000 closing costs estimated on a $100000 Loan should make borrowers think hard about using a No Closing Cost Mortgage.

Usually, the "no-cost" option is beneficial for first time homebuyers who may not have enough saved up to warrant paying the closing costs. It should be made very clear as to what options are available and the differences between a "no-cost" and other loans should be very clear.