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Home refinancing: No-closing-cost refi basics

by Bob Hummer 09/27/2022

Refinancing a home mortgage is fairly common, and can make the fees and costs a little easier to understand. In fact, those searching for options typically know about the upfront closing costs, loan origination fees and other fees and costs to be paid to the new mortgage lender. But did you know there’s a way to not pay those closing costs upfront?

Thanks to no-closing-cost refinance options, homeowners can roll those costs into their new home mortgage and pay those fees and costs over time instead of all at once.

Here are a few key basics for those interested in no-closing-cost refinancing:

When to refinance with no closing costs

Homeowners refinance their mortgages for a variety of reasons. Among those reasons are adjusted monthly payments and borrowing against their home equity.

While these options are widely available for traditional cost refinancing, those hoping to receive these benefits without paying substantial closing costs in a lump sum should consider refinancing without closing costs.

No-closing-cost refinancing is especially great for those who may need extra cash to cover an emergency expense, since there’s no requirement for upfront payment of the overall closing costs.

Where the fees and costs go

Typically, the fees and costs are wrapped into the new monthly payment. This can be observed in numerous ways such as a higher monthly payment than traditional refinancing, a higher interest rate or a longer loan term.

No-closing-cost refinancing still requires the fees to be paid, but you don’t have to have the money to pay them all at once, making them a feasible option for those with financial limitations or surprise expenses.

Know your whole situation

Understanding your situation is key to making the right choice for your home and mortgage payments. For example, think about whether this is your permanent home or if you plan to sell later, as this can directly affect whether no-closing-cost mortgage refinancing will cost you more over time.

While no-closing-cost refinancing seems like the optimal answer for a variety of reasons, it’s still essential to do a deep dive into your goals and needs. If you have questions about lender fees, origination fees or any other part of the refinancing process, contact your mortgage lender.

If you’re not sure where to start, try your real estate agent. They may know a loan officer or mortgage broker that can help you on your refinancing journey.

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