Refinance loans with no closing costs – is it free?

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Are refinance loans with no closing costs possible? It would be a grave mistake to underestimate how much needs to be paid when it comes to closing costs in refinancing loans. But closing costs should not hinder you from applying for a refi loan because refinance loans with no closing costs are possible.

Refinance loans with no closing costs meaning

What does a no-closing cost refinance mean? You don’t have to pay the closing costs when applying for a loan. But before you rejoice, this doesn’t mean that you won’t be paying the amount and take it as free or with a discount. The closing cost you need to pay will form part of your principal, so it will still be there.

Usual inclusions in closing costs

When applying for a refinance, here’s the usual breakdown of the fees that go along with your closing costs:

  • Origination fee – includes the underwriting, application fee, and other administrative costs of your loan and can be 0.5%-1% of the loan amount.
  • Title fee – the title, or deed, is a piece of paper that will prove that the property you bought is in your name already and transferred from the seller.
  • Appraisal fee – when it is time to appraise your property, an appraiser comes to assess the value of your property, and the assessment will be the basis for calculating your loan-to-value ratio.
  • Credit report fee – as the name suggests, lenders need to know the health of your credit. Some lenders will charge you from $35-$50 for credit report fees.

When your lender offers you refinance loans with no closing costs, you will either have a higher loan balance or an increase in interest percentage. You may not have both so choose if you want to take the route of an increased mortgage rate and expect to pay more over time or decide to have a higher loan balance. Drop us a line, and we can give you more details on which option is best for you.