When you decide to refinance your existing loan, you will have to pay towards fees and charges that can add up to a significant amount. A no closing cost refinance is one where the lender waivers the closing charges. Banks and other lending institutions often offer no closing cost refinancing plans to attract borrowers. This doesn’t mean that they are giving you these benefits for free. The interest rate on a no closing cost refinance loan will be marginally higher to make up for these benefits.
When you go for a no closing cost refinance loan, make sure that you are getting a good deal and the interest rates are not unfairly inflated by the lender. If you have an adjustable rate mortgage and want to switch to a lower-rate fixed mortgage, a no closing cost refinance is a good option as it minimizes your switching costs.
Keep the Annual Percentage Rate or APR in mind – if the APR is more than the interest rate, then you will have to pay some money towards lender fees. Also remember that the APR does not include all closing costs.
A no closing cost refinancing option makes more sense if you are not planning on keeping the loan for too long and have decided to sell your home in the near future. But if you do plan to stay in your home for the foreseeable future then you should be wary of a no closing cost refinance and only opt for it after careful consideration.
