What is a "no-cost" refinance?
There’s no such thing as a free lunch. A "no-cost" refinance is actually one where the costs of refinancing are paid by the lender who recovers the costs by charging a higher interest rate. True, you don’t pay closing costs up front but that’s because the cost of the transaction is built into the interest rate. If you plan to pay off the mortgage in a few years, this type of deal can save you money. But if you hold your mortgage for a long time, it may cost you more in the end because you’ll be paying for title insurance, attorney’s fees, surveys, documents, settlements, and all the other fees in the form of a higher interest rate for the term of the loan.