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Pros And Cons Of A No-Fee Mortgage

When you apply for a mortgage, you are handed over certain rules and regulation to follow during the procedure. You are also given a document containing all the information about fees and other payments that you are required to make before your application is processed and you move ahead. All mortgages have a certain fee attached to them. This may be used for the lender’s own benefit such as service, administration costs, time invested in your application, and the likes of it.

In a no-fee mortgage, the lender does not ask you to pay any charges, which includes not paying the processing fees, application fees, third-party costs, etc. When the buyer is exempted from all the above-mentioned fees, he/she is able to save 3-5% of their money on these additional costs. However, what may seem like a great deal on the outside may be extremely misleading. The fee that you are not required to pay at the beginning can result in you paying it later on in the form of interest or closing fee. To avoid becoming a victim of such a scheme, which is nothing but a clever wordplay, it is essential to learn everything that there is to know about a no-fee mortgage.

Pros of a no-fee mortgage
Before criticizing this type of a loan, let us discuss a couple of advantages or pros of a no-fee mortgage.

Cheaper than other mortgages
Imagine that you are longing to buy a house for yourself but you don’t have any funds to begin with. What would you do? Whom would you approach? A bank will ask you to deposit a certain amount as down payment but you do not have the funds. If you are able to buy a house for yourself by taking a mortgage that does not require you to invest anything in the beginning and simply pay installments once the loan is sanctioned, wouldn’t that be exciting? A no-fee mortgage does exactly this. It is cheaper than the other mortgages available in the market and lets you make the purchase without any hassle.
No deposits
As discussed earlier, in a no-fee mortgage, you are not required to pay any large deposits initially. So, it is okay if you do not have large amount of funds saved for a deposit.

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Cons of a no-fee mortgage
No-fee mortgages have been widely criticized. In fact, they have been responsible for several mortgage scams too. They seem appealing in the beginning but they require a clever examination before engaging. Here are a couple of cons or disadvantages of a no-fee mortgage.

Could not necessarily be cheaper
Yes, you do not have to pay any deposits at the start and yes, you are excused from paying the application and the processing fee, but in reality, you end up paying more than what you would pay otherwise. No-fee mortgages may have hidden fees and may require you to pay other additional costs later.
High-interest rates
The hidden fee could be anything else or it may simply be in the form of high-interest rates. Lenders generally charge higher interest rates on no-fee mortgages.

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