No Closing Cost Refinancing

A commonly misunderstood term is no cost refinance or no closing cost refinance. When people think of this or hear of this, they usually assume that costs or fees are waived entirely while still maintaining the low rates. This is wrong. There is no such thing as ‘no cost’ and there is certainly no such thing as ‘free’ in the business world. Everything has a payment of some sort though the manner in which you provide compensation might not be obvious at first. No cost refinancing is a sneaky way to attract customers with ‘zero-cost’ claims and then catch them with interest rates that might put them in deeper debt. In order to properly understand the implications of the term ‘no cost’, learning its definition with our refinance guide is in order.

What is No Closing Cost Refinancing?

No closing cost refinance is a transaction where you don’t have to pay upfront fees of any sort. The broker or lender will be the one to pay all the various settlement costs for the mortgage. It isn’t a new kind of refinancing option but it isn’t very well known either.

Pros and Cons of No Cost Refinance

A refinancing closing cost can often reach up to quite a lot of money, especially for upfront payments. A lot of people would probably think twice before handing over a big chunk of their cash and actually deciding if refinancing for cheap mortgages is really worth the price.

Advantages to No Closing Cost Refinancing:

  • Good for short-term mortgages since a lack of upfront fees will offset the higher rates
  • If interest rates drop, you’re pretty much golden and the initial bump to interest rates will taper off to manageable levels
  • Will cost you a lot less if you plan to upgrade to a more expensive house sometime soon
  • Ideal for people who refinance often as upfront costs rack up when going for more traditional refinancing

Consider the list of advantages given above and see if any of those appeal to you. They aren’t for everyone and should only be considered if the circumstances apply or if you really abhor paying closing costs. No closing cost refinancing is a pretty good deal when the conditions for the advantages are met but there are more than a few things that should factor in on the other side of the scale:

  • Higher interest rates since closing costs will pad them
  • Some brokers still charge third-party fees like insurance and taxes
  • Long-term mortgages won’t benefit at all from no cost refinancing
  • Taking a chance on interest rates might not be profitable for a less than liquid investment like real estate


No cost refinancing is a good move provided that you’ve taken the higher interest rates into account and have judged it as an acceptable tradeoff for getting rid of the closing costs. However, if you’re like the majority of the population and plan on keeping the house you’re still paying for, traditional refinancing might be the way to go.


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