Strictly speaking, All mortgages have closing costs, and that includes when you refinance your mortgage. Lender fees for processing and underwriting, appraisals, escrow, title insurance, and other third-party costs all need to be paid somehow.
With a “no closing cost refinance,” these fees aren’t paid by the borrower at the time the loan closes. Rather, these costs are either incorporated into the loan in the form of a higher interest rate, or folded into a higher loan balance. Borrowers can also choose a mix of these two options.
Typically the interest rate for a no closing cost refinance is 0.25% to 0.5% higher than a home loan with closing costs paid by the borrower. At Newfi, you can choose any mixture of paying costs at closing, offsetting closing costs with lender credit, or folding closing costs into your loan balance — the choice is yours.
Remember that whether you have closing costs or not, refinancing your mortgage can provide substantial benefits like reducing your interest rate or lowering your monthly payment in a way that fits better with your financial situation.
What would be my new monthly payment after a no closing cost refinancing?
Your exact monthly payment depends on the interest rate you qualify for, the amount of closing costs you wish to incorporate into your loan, and other factors. Contact us to review your options and calculate your new payment.
What would be my interest rate for a no closing cost refinance?
Refinance interest rates vary depending on your credit, income, and other factors. Rates can change every day, so it’s smart to find out what rate you qualify for today.
Frequently Asked Questions
What are the advantages of a no closing cost refinance?
- No out-of-pocket expenses due up front upon closing
- Save cash to use for other financial goals during early stages of refinance
- May be a lower cost option if you will sell or refinance in 5 years or less
What are the disadvantages of a no closing cost refinance?
- Higher monthly payments: usually $50 to $100 per month more
- Higher interest rate or balance increases total mortgage expense
- Increased expense will outweigh closing costs if you keep the loan for a long time
How does a no closing cost refinance work?
With a refinance, you essentially take out a new loan that would cover your current mortgage balance and any other fees you want the loan to pay for, including the closing costs. After the refinance closes, you pay off your old loan balance in its entirety. You would also start making monthly mortgage payments on the new loan.
How does a no closing cost refinance compare to a refinance with closing costs?
- A no closing cost refinance has no or lower closing costs than an ordinary refinance. However, all other things being equal, the interest rate will be 0.25% to 0.5% higher.
- A refinance with closing costs will typically have a lower interest rate, but there will be closing costs due when the refinance is finalized.