REDUCE CLOSING COSTS BY RENTING MONEY: I am working with a homebuyer who wants to reduce the amount of cash needed for closing. We would rather not ask the seller to pay for buyer costs because we are in a multiple offer situation. The solution? Have the lender pay the buyer closing costs. How? Rent some money! Here is an example from Bob Saltzman (website) at Guaranteed Rate:
For their 417k, loan amount, I suggested they pay an additional .375% on a 30 year fixed rate loan. This higher interest rate generated a 9k credit, which not only covered all costs, but even some homeowners insurance premium. The "opportunity cost"? The increased rate generated the 9K lender credit. In this case, the difference in mortgage payment was $92 per month.
Another way to look at it is: if they keep the house / loan for less that 8 years, they are coming out ahead. If you divide the $9000 credit by the extra $92 per month, it would take almost 98 months before they pay back the 9k via monthly payments.