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No-cost mortgages are a type of loan that do not have any closing costs that the buyer will have to pay out of their own pocket. This type of mortgage can be very beneficial borrowers with little money to work with. Here are the basics of no-cost mortgages and how they work.
With a no-cost mortgage, the lender is going to pay all of the closing costs for you. Many people get this type of mortgage and the no-cash mortgage confused. However, they are not the same thing. With a no-cash mortgage, the lender is simply going to add the closing costs to the loan balance. With a no-cost mortgage, the lender is paying them for you.
With a no-cost mortgage, the lender is still going to get their money. Instead of requiring you to pay for the closing costs, they are going to charge you a higher interest rate. This interest rate is going to justify the lender paying for your closing costs over the long-term. Therefore, if you plan on living in your property for an extended period of time, this option might actually end up costing you more because of the higher interest.
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