You’ve saved enough for your down payment. Barely. Then you see the closing cost estimate: $8,000 to $12,000 in fees, charges, and prepaid items.
Your savings just became insufficient.
No-closing-cost mortgages solve this problem by shifting costs from upfront to ongoing. The lender pays your closing costs in exchange for a higher interest rate. For some Las Vegas buyers over 50, this trade makes financial sense. For others, it’s expensive.
Here’s how to know which category you’re in.
How No-Closing-Cost Mortgages Work
A typical mortgage comes with thousands of dollars in closing costs. These include:
Origination Fees: 0.5% to 1% of loan amount Appraisal: $400 to $600 Title Search and Insurance: $700 to $1,200 Recording Fees: $50 to $250 Credit Report: $30 to $50 Inspection: $300 to $500 Prepaid Items: First year of homeowner’s insurance, property taxes, initial escrow deposits
On a $300,000 loan, total closing costs typically run $6,000 to $12,000.
With a no-closing-cost mortgage, you don’t pay these fees upfront. Instead, the lender increases your interest rate. That higher rate generates extra interest over the life of the loan, which covers the closing costs the lender paid.
Example Trade-Off
Standard mortgage:
- Loan amount: $300,000
- Interest rate: 6.25%
- Closing costs paid by you: $9,000
- Monthly payment: $1,847
No-closing-cost mortgage:
- Loan amount: $300,000
- Interest rate: 6.75% (0.5% higher)
- Closing costs paid by lender: $9,000
- Monthly payment: $1,946
You save $9,000 upfront. You pay $99 more per month. Over 30 years, that extra $99 per month totals $35,640. You paid $35,640 instead of $9,000 for those closing costs.
But you might not keep the loan 30 years.
When No-Closing-Cost Mortgages Make Sense
The math changes based on your ownership timeline.
Planning to Sell Within Five Years
If you’ll sell the home in three to five years, you won’t pay that $35,640. You’ll only pay the higher monthly payment for the years you own the home.
Calculate the break-even point. At $99 extra per month, you’ll pay $9,000 in extra interest after 91 months (7.6 years). If you sell before that, the no-closing-cost option saved money.
Cash-Strapped After Down Payment
You have exactly enough for your 10% down payment on a $300,000 home. That’s $30,000. After down payment, you’ll have minimal reserves. Paying $9,000 in closing costs would either:
- Force you to put down less (triggering PMI)
- Deplete your reserves below lender requirements
- Leave you with zero emergency fund
Taking the no-closing-cost option preserves your reserves. You’ll pay more over time, but you’ll have financial cushion now.
Expecting to Refinance Soon
Your credit score is recovering from past problems. You qualify now, but at a high rate. You expect your score to improve significantly within two years. You plan to refinance once your credit is strong enough for better rates.
Taking a no-closing-cost mortgage means you’re not sinking money into closing costs on a loan you’ll replace soon anyway.
Relocating for Temporary Assignment
You’re moving to Las Vegas for a three-year contract. You’d rather own than rent, but you know you’re leaving when the contract ends. No-closing-cost mortgages make short-term ownership more affordable.
Uncertain How Long You’ll Stay
You’re 62 and buying in Las Vegas. You might love it and stay forever. Or you might realize after a year that you miss your previous city and want to move back. The uncertainty favors no-closing-cost because you’re not committed to long-term ownership.
When No-Closing-Cost Mortgages Don’t Make Sense
Planning Long-Term Ownership
You’re 55, downsizing into a home you plan to own through retirement. You’ll be there 15 to 30 years. Paying closing costs upfront and getting the lower rate saves tens of thousands over your ownership period.
On a $300,000 loan kept for 30 years:
- Pay $9,000 upfront → Total interest paid over 30 years
- No-closing-cost → Pay $26,640 more in interest over 30 years ($35,640 – $9,000)
The longer you stay, the more expensive the no-closing-cost option becomes.
You Have Adequate Cash Reserves
You have $60,000 saved. You’re putting $15,000 down on a $300,000 home. After down payment, you’ll have $45,000 left. You can easily pay $9,000 in closing costs and still have $36,000 in reserves.
Taking the no-closing-cost option costs you money for no benefit. You didn’t need to preserve cash.
Interest Rates Are Already High
In a high-rate environment, adding 0.5% to 0.75% to your rate hurts. If market rates are 6.5%, a no-closing-cost option at 7% or 7.25% means substantial extra interest. The higher the base rate, the more expensive the rate increase becomes.
You’re on Fixed Retirement Income
Every extra dollar in monthly payments matters when income is fixed. At $100 extra per month, that’s $1,200 per year you could spend on healthcare, travel, or other needs. Paying closing costs upfront and keeping the monthly payment lower might better protect your lifestyle.
The Break-Even Calculation
Always calculate your personal break-even point.
Step 1: Determine the Rate Difference
Compare the interest rate you’d get paying closing costs versus the no-closing-cost rate. Typical difference is 0.375% to 0.75%.
Step 2: Calculate the Monthly Payment Difference
Use a mortgage calculator. On a $300,000 loan:
- At 6.25%: $1,847 per month
- At 6.75%: $1,946 per month
- Difference: $99 per month
Step 3: Divide Closing Costs by Monthly Difference
$9,000 in closing costs ÷ $99 monthly difference = 91 months, or 7.6 years
If you keep the loan longer than 7.6 years, paying closing costs upfront costs less. If you sell or refinance before 7.6 years, the no-closing-cost option costs less.
Step 4: Adjust for Time Value of Money
That $9,000 today could earn investment returns if you don’t spend it on closing costs. If you can earn 7% per year investing that money, the break-even point shifts. This complicates the math but might extend the break-even period by a year or two.
No-Closing-Cost vs Rolling Costs Into Loan
There’s another option: rolling closing costs into your loan amount.
Rolling Costs Into Loan
- Loan amount: $309,000 (original $300,000 + $9,000 costs)
- Interest rate: 6.25% (same as paying costs upfront)
- Monthly payment: $1,902
- Extra payment vs paying costs upfront: $55 per month
No-Closing-Cost
- Loan amount: $300,000 (original amount)
- Interest rate: 6.75% (higher rate)
- Monthly payment: $1,946
- Extra payment vs paying costs upfront: $99 per month
Rolling costs into your loan amount is often cheaper than the no-closing-cost option if you’re planning to stay long-term. But it requires having enough equity to support the higher loan amount.
Las Vegas Specific Considerations
Market Volatility History
Las Vegas experienced dramatic home value swings during the recession. Values dropped 50% or more in some areas, then recovered over the following decade. This history creates uncertainty about future values.
If you’re unsure whether Las Vegas will remain your long-term home, no-closing-cost mortgages reduce your upfront commitment. If the market or your personal situation changes, you haven’t sunk substantial cash into a home you need to sell.
Hot Market Competition
In competitive markets, sellers favor buyers with minimal contingencies and strong financing. Having extra cash in reserve (because you didn’t pay closing costs) can help with negotiations or cover appraisal gaps.
Retirement Destination Uncertainty
Many people move to Las Vegas for retirement, then realize they miss family, friends, or their previous location. Taking a no-closing-cost mortgage reduces financial penalty if you decide to move back within a few years.
Property Tax and HOA Considerations
No-closing-cost mortgages don’t eliminate all upfront expenses. You’ll still pay:
- First year of homeowner’s insurance (typically $1,000 to $1,800)
- Property tax prorations
- HOA transfer fees and initial deposits
- Home inspection
- Moving costs
Factor these into your cash needs even with a no-closing-cost mortgage.
Questions to Ask Your Lender
What’s the exact rate difference?
Some lenders charge 0.375% more for no-closing-cost. Others charge 0.75%. The difference matters significantly over time.
Which costs are actually covered?
Some “no-closing-cost” mortgages cover lender fees but not third-party fees like appraisal, inspection, or title insurance. Get specifics on exactly what’s covered.
Can I pay some costs for a smaller rate increase?
Some lenders offer partial no-closing-cost options. Maybe you pay $3,000 of the $9,000 in costs, and your rate only increases 0.25% instead of 0.5%. This hybrid approach might optimize your situation.
What’s my break-even timeline?
Ask the lender to calculate this for you based on your specific loan amount and rates. Get it in writing so you can review it carefully.
Can I refinance without penalty?
Make sure the no-closing-cost mortgage doesn’t have a prepayment penalty. You want the flexibility to refinance or sell whenever you choose.
Combining Strategies
No-closing-cost mortgages work well combined with other strategies.
No-Closing-Cost + FHA Loan
FHA loans require only 3.5% down. Combining FHA’s low down payment with no-closing-cost maximizes cash preservation. Good for buyers with limited savings but stable income.
No-Closing-Cost + Smaller Down Payment
Instead of putting 20% down and paying closing costs (draining savings), put 10% down with a no-closing-cost mortgage. You’ll have PMI, but you’ll maintain reserves and financial flexibility.
No-Closing-Cost + Plan to Refinance
If you expect interest rates to drop or your credit to improve, no-closing-cost makes sense as a short-term solution. You’re not committed to the higher rate long-term.
The 5-Year Rule of Thumb
If you plan to stay in the home 5 years or less, no-closing-cost mortgages usually save money. If you plan to stay 6+ years, paying closing costs upfront usually costs less total.
This isn’t absolute. Your specific numbers matter. But it’s a useful starting point for initial evaluation.
Evaluating Your Situation
Ask yourself:
How certain am I that I’ll stay in this home long-term? If you’re 50+ and buying what you hope is your forever retirement home, pay closing costs upfront. If you’re testing Las Vegas as a retirement destination, no-closing-cost reduces risk.
How tight is my cash situation? If paying closing costs would deplete savings or prevent you from meeting reserve requirements, no-closing-cost solves a real problem. If you have comfortable savings, taking the lower rate makes sense.
What’s my expected timeline to refinance? If you’re refinancing within 2-3 years for any reason (credit improvement, rate drop, eliminating PMI), no-closing-cost is smarter. If you’re refinancing in 10+ years or never, pay costs upfront.
How important is monthly cash flow? Retirees on fixed income might prefer paying $9,000 once and having $99 lower payments forever. Working buyers with strong income might not notice the $99 difference but appreciate keeping $9,000 in savings.
Making the Decision
Get loan estimates for both options from your lender. Compare them side by side. Calculate your personal break-even based on realistic ownership timeline.
Don’t let the lender decide for you. They might push no-closing-cost mortgages because they’re easier to sell. Or they might push traditional mortgages because they prefer certain loan types. Make your decision based on your situation, not their preference.
Work with Aaron Taylor “The Real Estate Guy” and Las Vegas lenders who present both options without bias. They’ll help you understand the true costs and benefits for your specific timeline and financial situation.
No-closing-cost mortgages aren’t inherently good or bad. They’re a tool. Used correctly for the right situation, they save money and preserve cash. Used incorrectly, they waste tens of thousands of dollars over time.
Frequently Asked Questions
What’s a no-closing-cost mortgage?
A mortgage where the lender pays your closing costs in exchange for a higher interest rate. You save $6,000 to $12,000 upfront but pay a higher monthly payment. The higher rate generates extra interest over time that reimburses the lender for the costs they covered.
How much does the interest rate increase with no-closing-cost mortgages?
Typically 0.375% to 0.75% higher than the rate with paid closing costs. On a $300,000 loan, a 0.5% rate increase adds about $90 to $100 to your monthly payment. The exact increase depends on your loan amount and lender pricing.
Is a no-closing-cost mortgage worth it if I plan to stay 10 years?
Probably not. Calculate your break-even point. If closing costs are $9,000 and the extra monthly payment is $100, break-even is 90 months (7.5 years). After 10 years, you’ll have paid $12,000 in extra interest for $9,000 in closing costs. Pay costs upfront for long-term ownership.
Can I get a no-closing-cost mortgage with FHA or VA loans?
Yes. FHA and VA lenders offer no-closing-cost options just like conventional lenders. The trade-off works the same: higher interest rate in exchange for lender-paid closing costs. This can be particularly helpful for VA buyers using their zero-down benefit.
What closing costs aren’t covered by no-closing-cost mortgages?
This varies by lender. Most cover origination fees, appraisal, title insurance, and processing fees. Most don’t cover prepaid items like homeowner’s insurance, property tax prorations, or initial escrow deposits. Ask your lender exactly which costs are and aren’t covered.
Should I choose no-closing-cost if I’m planning to refinance soon?
Yes. If you expect to refinance within 2-3 years (due to credit improvement or rate drops), don’t pay closing costs on a loan you’ll replace. No-closing-cost makes sense for intentionally short-term mortgages.
Can I negotiate a smaller rate increase for partial closing cost coverage?
Sometimes. Some lenders offer hybrid options where you pay part of the closing costs and get a smaller rate increase. For example, you might pay $4,000 of $9,000 in costs and get a 0.25% rate increase instead of 0.5%. Ask your lender about partial no-closing-cost options.
Is rolling closing costs into my loan amount better than no-closing-cost?
Often yes, for long-term ownership. Rolling $9,000 into the loan increases your balance but keeps your rate low. This typically costs less over 10+ years than taking a higher rate with no-closing-cost. But it requires enough equity to support the higher loan amount.
What if I’m uncertain how long I’ll stay in Las Vegas?
Favor no-closing-cost. Uncertainty tilts toward minimizing upfront commitment. If you discover within a year that Las Vegas isn’t right for you, you haven’t sunk $10,000 into a home you’re selling. The higher rate costs you relatively little over a short ownership period.
Can I switch from no-closing-cost to regular mortgage by refinancing?
Yes. You can refinance any time (assuming no prepayment penalty). If you take a no-closing-cost mortgage and later decide to stay long-term, refinance to a standard loan with lower rate. Just factor in new refinancing costs when deciding whether to switch.
Key Takeaways
- No-closing-cost mortgages trade higher interest rates (typically 0.375-0.75% more) for lender-paid closing costs of $6,000 to $12,000
- Calculate break-even by dividing closing costs by extra monthly payment amount to determine crossover point
- No-closing-cost mortgages make sense if selling or refinancing within 5-7 years typically
- Pay closing costs upfront if planning 10+ year ownership to minimize total interest paid over time
- At 50+, consider whether preserving cash now or minimizing monthly payments in retirement matters more
- Rolling closing costs into loan amount often beats no-closing-cost option for long-term owners
- Las Vegas market volatility and retirement destination uncertainty favor no-closing-cost for risk reduction
- No-closing-cost option doesn’t eliminate all upfront costs like insurance, tax prorations, and HOA fees
- Combine no-closing-cost with low down payment programs to maximize cash preservation if reserves are tight
- Work with Las Vegas lenders who present both options objectively rather than pushing one over the other
