Even though a no-cost refinance sounds great, there’s really no free lunch.
It’s like marrying someone for their money. You might think you’re getting a great deal, but you’ll probably have to put up with your partner’s controlling, narcissistic, and disgusting ways. If you’re not physically attracted to him or her, then that’s a whole other set of problems to deal with.
OK, a no-cost refinance isn’t as bad as that. But there are always costs even if you can’t see them.
A no-cost refinance is a loan transaction in which the lender pays all the refinance costs.
Refinance costs includes: processing and underwriting fees, the appraisal fee, loan origination fees, title and escrow fees, notary fees, and courier fees.
These fees can easily add up into the thousands of dollars, making potential borrowers hesitate as to whether to go through with the refinance or not.
See some of the fees below I had to pay during my last refinance some years ago, but was mostly covered through credits.
To boost business, lenders entice potential borrowers by covering all the fees so there is no out-of-pocket cost to the borrower.
If the borrower gets a lower mortgage rate without paying any fees, then the decision to refinance becomes easier. The only factor to really consider is the time and effort it takes to refinance.