The pitch for a no-cost refinance sounds pretty attractive: replace your current mortgage with a lower-interest rate mortgage and pay nothing for the privilege of doing it. But before signing on the dotted line, it’s important to realize that “no cost” doesn’t typically mean “free” when it comes to refinancing.
The true meaning of “no cost”
No-cost refis usually mean that borrowers won’t pay upfront costs to get the new mortgage loan — so they might better be called “no-initial-out-of-pocket-cost refis” — but that doesn’t mean the loan won’t cost in the long run. In general, there are two ways a lender can offer a no-cost refinance: […]