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NO Closing Cost Mortgage Loans in MN, WI, and SD
Are They A Good or Bad Idea? YOU DECIDE after reading this...

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One of the most confusing areas for consumers in a mortgage loan transaction are closing costs. Here I'll explain the advantages and disadvantages of the highly advertised "zero cost" or "low cost "loans.

First and foremost, there is no such thing as a No Closing Costs Loan!

Everyone knows there are costs associated with getting a mortgage loan; appraisal, credit reports, state taxes, county recording fees, title companies fees, lender fees, escrows, and more. Someone has to pay these closing costs and fees, and it is always YOU.

The various ways of how you can pay closing costs them is what this article tries to explain.

Homeowners in Minneapolis, St Paul, Madison, Milwaukee, and throughout all of Minnesota, Wisconsin, and South Dakota need to understand that in a no lender fee or no closing cost mortgage loan, the lender simply uses "negative" points to offset your costs. In the example below, by having the 4.75% interest rate, versus a 4.25% interest rate, you can reduce - or offset through higher interest rate, some of your mortgage loan closing costs. By choosing this option, it appear as if you saved thousands in closing costs. GREAT! But while lower costs always sounds good, you now have a significantly higher interest rate!

OK, now what? Interest Rate versus Closing Costs

No matter what anyone says, a zero cost, or no lender fee loan is NOT automatically a great deal. Interest rate and closing costs go hand in hand.

Although it may sound so much better than paying thousands in closing costs, you have to analyze each individual loan and client situation to determine the benefits. Many lenders speak highly of the "thousands of dollars" you save with a no closing cost refinance. They never discuss the fact that you may spend significantly more in interest over the full life of the loan than you ever saved in up-front closing costs!

Pick the best closing cost option for you

In the example below, you will pay $28,466 MORE in interest over a 30-year loan by not just rolling your closing costs into the loan amount today versus a full no closing cost option.  If you are going to be in the home just 5-years, you still save $6415 in interest versus a full no closing cost loan.

On the other hand, maybe you are looking to sell the home in two-years. It probably makes sense to pay a little more per month, than to add to your loan amount.  Finally, maybe because of debt ratio guidelines, or where your homes appraised value came in, it may make a lot of sense to select a no closing cost loan to make the deal work.

View our live mortgage interest rate and closing cost options anytime - No Obligation, and no SSN required.

Deal or No Deal?


Most Common /

OK short-term
BAD long-term
Most Common Low Cost Option

OK short-term
Very BAD long-term

Considerations on a $200,000 - 30 year fixed loan Closing Costs Paid Out of Pocket Closing Costs Added to Loan No Lender Fee Loan Full No Closing Cost Loan
Loan Amount $200,000 $205,000 $203,000 $200,000
Interest Rate 4.25% 4.25% 4.75% 5.00%
Principal & Interest Payment $983 $1008 $1,058 $1,073
Closing Costs On Estimate $5,000 $5,000 $3,000 $0
Out of Pocket Closing Cost Paid $5,000 $0 $0 $0
Interest Paid over 5 years $45,117 $46,192 $48,290 $52,607
Interest Paid over 10 years $81,421 $83,403 $87,535 $96,053
Interest Paid over 30 years $158,665 $162,578 $171,811 $191,044

FACT: In a refinance loan, the vast majority of people roll the closing costs into the new loan amount.

A common misconception is that a zero cost loan is better than adding thousands of dollars in closing costs to the new loan. THIS IS NOT TRUE! Even if you were to only stay in the property 5 years, why have the higher payment when a few thousand dollars added to the loan principle is usually meaningless in the grand picture.

I hope this article has helped you to understand the varied measures used to determine the advantages and disadvantages of a no closing cost loans. Each borrower is different, and the evaluations must be made on a case-by-case basis. As you can see, there are many factors to consider when looking at the available options. With us as your personal Mortgage Consultants, we will be able to answer all of your questions, outline the costs and benefits, and even give you a few new ones to consider!

While everyone’s individual financial situation varies, let us show you the math so you make the correct choice. Of course, if a no closing cost loan makes sense for your case, we will be happy to do one for you.

Get Started - It's Easy
  1. Apply for No Closing Cost loan
  2. Review with Loan Officer
  3. Submit Documents
  4. Close
  5. Enjoy your savings
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33 Wentworth Ave E - Suite 290
St Paul, MN 55118

(651) 552-3681  

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Our services available only for properties located in Minnesota, Wisconsin, and South Dakota. Licensed as Mortgages Unlimited, Inc. NMLS # 225504. As a Lenders One partner, we are part of the 3rd Largest Retail Mortgage Originators in the country. We are consistently ranked as one of the top mortgage lenders in Minnesota by Minneapolis St Paul Business Journal. Any use or duplication of any materials is strictly prohibited.  All images, text, and materials Copyright 1998 - 2019 Joe Metzler. This is the private web site of Joe Metzler, NMLS #274132. All Rights Reserved.

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