Some lenders offer refinancing options advertised as having no or low closing costs, but the expenses generally do not simply disappear. Instead, the lender may cover certain costs in exchange for a higher interest rate, or some expenses may be incorporated into the new loan balance. This can reduce the amount you pay upfront but may increase your monthly payment or total borrowing cost. Whether this arrangement makes sense depends on how long you expect to keep the new mortgage and how much the alternative costs. Compare a traditional refinance with a no-closing-cost option by looking at the interest rate, monthly payment, upfront expenses, and total cost over your expected ownership period. Our guide to no-closing-cost refinancing explains the main trade-offs. The goal should be to compare the complete financial picture rather than focusing only on avoiding upfront fees.
