(This is Part 2 of a three-part series. See Part 1: Who should use no-cost mortgages? and Part 3: Lenders roll out no-cost-mortgage deals.) A no-cost mortgage is one where the lender charges a higher interest rate in exchange for paying most of the borrower's settlement costs. In last week's column I gave two reasons, in addition to being short on cash, why a borrower might find a no-cost mortgage advantageous. One is that the borrower does not expect to have the mortgage very long, in which case he won't be paying the higher rate very long. A second reason is that the no-cost mortgage provides protection against being overcharged at the settlement table. Why no-cost mortgages protect against being overcharged: In selecting a loan provider, borrowers typically shop for rate and poin...
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