A No Point No Fee loan can be extremely cost effective if you plan to sell or refinance your home with-in five years.

Sometimes a no point, no fee loan may seem like a good idea, however it may also carry a much higher interest rate to make up for the lack of closing costs and fees. Loans with no closing costs and fees associated with them are usually a good idea for people who are looking to stay in their homes for only a short while. For borrowers thinking they will be in their homes for a very long time, they should weigh their options very carefully to see which option presents them with the best financing.

On most conventional 30 year fixed amortizing mortgages paying a "point" (1% of the value of the loan) will lower your interest rate approximately .25%. This is a generalization, but it usually takes 63 months or five years and three months make paying points cost-effective. If you plan on being in your home more than this, then paying the point upfront will reduce your cost in the long-run.

 

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