Closing Costs Can Put $$$ In Your Pocket

Save on closing costs when buying real estate. First, negotiate the asking price down (example: asking price of $200,000 negotiated down to $185,000). Then, try to talk the seller into paying the closing costs. He will probably refuse. So, tell him you will pay an extra $8,000 for the home if he will use that extra $8,000 to pay $8,000 in closing costs. He still gets the same amount of cash at closing.

You have managed to save $8,000 in cash by having the closing costs "merged" into the mortgage. You pay an extra $50/month on the mortgage, but you save $8,000 in cash, now.

Now take the $8,000 cash you saved and pay off short-term obligations - credit cards, car payment, etc. This will lower your monthly expenses by as much as $120 each month, which you can now use to pay on your mortgage.

In this way, you accomplish a couple of things - first, you avoid paying $8,000 out of pocket for closing costs. Second, You have transferred 3-15 years of high interest debt on depreciable assets into 30 years of low interest debt on appreciable assets, saving up to $120/month, which is a net gain of $70/month ($120 saved -$50 extra in mortgage=$70 gain). Third, you have turned non-deductible credit card interest into tax deductible interest, because the $8,000 in closing costs that were rolled into your mortgage creates additional interest on your mortgage.