No-Fee Loan Can Offer Benefits to Consumers

Carla Lazzareschi (“ ‘No Fee’ Loans Too Good to Be True,” Jan. 7) did not mention the many benefits to the consumer of a no-fee loan as opposed to paying points to get a lower rate.

Let’s take her example of a homeowner who has a $200,000 mortgage. After financing $5,000 in points and fees to buy the rate down to 7% versus an 8%, no-fee loan, the difference is $103.65 per month. If the homeowner lives there for less than four years, he will actually save more money by refinancing into an 8%, no-fee loan as opposed to paying $5,000 in points and fees to get a 7% rate. She also does not consider the possibility of rates moving even lower any time in the next 30 years.

For example, if that same homeowner can get a $200,000, 7% no-cost loan in one year from now and you amortize the loan over 29 years (to account for the lost year), your payment is $1,344.26, compared with the $205,000, 7% payment of $1,363.00. You’ve saved $19.62 per month plus the $5,000 in points and fees.

As long as the no-fee loan doesn’t have a prepayment penalty, it can be more advantageous in the right set of circumstances to the homeowner, because we simply don’t know how low rates will go.

JEFF LAZERSON

President

Portfolio Mortgage

Lake Forest