Question

Under what circumstances would it be financially beneficial to get a mortgage loan with a slightly higher interest rate to significantly reduce the closing costs?
Under what circumstances would it be financially beneficial to pay higher closing costs to get a mortgage loan with a slightly lower interest rate?

Answer 1

The circumstances under which it would be financially beneficial to get a mortgage loan with a slightly higher interest rate to significantly reduce the closing costs is when the prevailing interest rates are low and so a slight increase in the interest rates will not make much of a difference. Also when closing costs are high then this tradeoff between interest rates and closing costs will reduce the overall cost associated with buying a house.

The circumstances under which it would be financially beneficial to pay higher closing costs to get a mortgage loan with a slightly lower interest rate is when the prevailing interest rates are high and so a decline in the interest rates will make a significant difference. Also when closing costs are low then this tradeoff between closing costs and interest rates will reduce the overall cost associated with buying a house.