It’s the same company that Wesley pitches for. LENOX.
The fact is that MOST consumers do not understand their true mortgage costs or have a clue about how to shop for a mortgage.
The ONLY way that you get a “no cost loan” is to pay a higher interest rate and monthly fee than you really qualify for, which results in the lender paying a commission to the broker as a reward for overcharging you.
It’s a lie to say that it’s FREE.
Every loan prices differently as do the buy-down and buy-up options. A direct lender such as a bank doesn’t disclose their fees to you in the same way that a broker MUST. Their overcharging is internal. They may say that they don’t have any fees, but their retail rates are usually higher, and the bank employee pushing the product may not really understand it and is told what to say and what not to say.
They only offer their bank’s products/programs.
It’s not a given that a bank or broker will ALWAYS have the best program available, and because most people don’t know how to shop, they truly get screwed on their mortgage in either rate or fee, or both.
It’s more accurate to use an interest only loan for comparison because you aren’t complicating the equation with principal paid, but’s it is the same idea with a fully amortized loan. It’s just misleading to only compare payment amounts on a full am.
Say that a $400K interest only loan @6.25% pays ZERO commission.
You will need to add all fees/closing costs, say $7500 to cover everything.
At 6.75% the $400K loan pays a $7500 commission to cover the fees. At 6.875% the commission is $9000. Etc.
So at 6.75% your payment is $2000 a year higher,if you don’t pay $7500 up front. Some people think that it’s less than 4 years to break even, but it’s longer than that.
It really depends on how long you intend to keep the loan.
In this case, short of 5 years, take the higher rate and higher payment.
Longer than a 5 year plan, pay the fee and get the lower rate (assuming that you can) Sometimes it’s a qualifying issue.
