Are there no closing cost refinance loans?

The term “no closing costs refinance loans” is a bit of a misnomer. There is no such thing as a no closing cost loan. All loans have closing costs, but you have options on how to pay them.

The vast majority of people doing a mortgage refinance simply add the closing costs to the existing loan balance to get your new loan amount. Some people call this “no cost” because there are no costs out of pocket.

The next option is reducing some to all of your real closing costs by increasing the loans interest rate a little to a lot. Officially this is known as “lender credits.”

Small rate increases equal small reduction in costs, while larger rate increases equal larger closing cost reductions. That effectively makes appear to be a low, or “no cost” refinance because the lender is paying the costs. But if they are just increasing the interest rate – YOU are paying closing costs over time.

The reality is that no lender works for free, plus there are also many others involved in your loan who also get paid (appraiser, credit bureau, title company, state deed taxes, and recording fees, and more.) You pay refinance loan closing costs, you always pay. How would you like to pay?