Refinancing with no closing costs: Top pros & cons to consider

by Bill and Aby Brooks, REALTORS® 12/04/2022

Refinancing your home can have a plethora of benefits. Among lowering your monthly payment, refinancing your home can also allow you to borrow against your home’s equity. However, refinancing in the beginning can have significant closing costs, such as application fees, loan origination fees, mortgage insurance and interest - especially when involving mortgage points.

Your new mortgage’s closing cost could have upfront fees of anywhere from 2% to 5%. However, there is another type of refinancing option available for homeowners who’d prefer to roll their closing costs into their monthly payments.

Here are the pros and cons of no-closing-cost refinances:

Pro: No closing costs

With no-closing-cost mortgage refinancing, you typically don’t have any upfront closing costs. In fact, your closing costs are rolled into your monthly mortgage payment, so you don’t have to worry about interfering with your current budget.

Con: Higher monthly payment

Because there are no upfront closing costs for a no-closing-cost refinance option, you may have higher monthly payments than if you’d chosen a cost-refinance method. However, higher monthly payments may not be the agreed term for rolling your fees into your new mortgage. Higher interest rates or a longer loan term are also viable options.

Pro: Immediate budget impact

If you’re taking out a no-closing-cost refinancing loan, you’re probably in the market for holding on to your budget at that time. This refinance option allows you to maintain your current budget and can give you the cash needed for other projects, responsibilities or emergencies.

Con: Monthly budget impact

If you are saving for something or budgeting for a big project, you could be set back a bit by the amount you’ll have to pay on your new monthly mortgage payment. Because the fees are rolled back into the loan itself, your monthly payments may be higher than originally anticipated, putting a hurdle in your savings plans.

Regardless of your reasoning for pursuing a no-cost-refinancing option, knowing both sides of the coin can help you make a more informed decision. Both types of refinancing are great options, and if you have questions about which to choose, try speaking with your agent or a finance professional employed with your current mortgage lender.

About the Author

Bill and Aby Brooks, REALTORS®

Aby’s understanding of excellent customer service stems from her extensive professional background. Prior to earning her real estate license in 2005, along with her college degree that focuses on business and engineering, Aby was the head of purchasing, inventory and quality assurance for an OEM medical and aerospace manufacturing company. Known by her clients and fellow realtors for her tenacity, honesty, integrity, and attention to detail, as a full-time realtor, she is also appreciated for her quick response to her client’s needs. Aby has been an avid horse rider and owner since the age of eight, with her husband Billas a local firefighter/EMT they are very active within the community. Bill served as a US Army Airborne Ranger in 75th Ranger Regiment, he is a combat-wounded veteran who was awarded a Purple Heart. Bill's background as facility Manager for an International metals company and as a firefighter/EMT gives him the experience, attention to detail and the desire to go above and beyond to serve his customers. The Brooks' serve on the board of a local non-profit (501c3) that gives back to the veterans, first responders and their families. The Brooks family resides on their small ranch in Manatee County. Aby& Bill excel in all types of real estate and their passion is helping people. “We genuinely like people, growing up in Sarasota and Manatee counties and now raising our own family here, it is an absolute pleasure to share our growing area with newcomers and reminisce with longtime residents. Our area has so much to offer and it is our business to help folks buy and sell their own piece of paradise.”