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Comparing Total Costs
The following example is designed to show you when it is beneficial to either
pay or not pay closing costs. And how rate, monthly payment, and time spent in
the loan determine total costs.
Mortgage lenders will offer you a "no closing cost" loan and pay for those
costs by giving you a higher interest rate.
|
Pay Closing Costs |
No Closing Costs |
 |
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|
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|
Loan Amount
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$250,000.00
|
$250,000.00
|
|
Rate
|
6.00%
|
6.375%
|
| Closing Cost |
$1,500.00 |
None |
| Monthly Payment |
$1,498.88 |
$1,559.67 |
| |
| Monthly Savings |
$60 |
-- |
| Break Even Point |
25 months |
-- |
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In this example, if your estimated time in the home (loan) is
greater than 25 months, paying closing costs will result in lower total
costs by $60.80 each month you stay in the loan beyond 25
months. Conversely, if your estimated time in the home is less than 25 months,
the No Closing Cost Option will result in lower total costs.
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