How It Works

A no costs, no points and no fees refinance, means exactly that, the borrower pays nothing to refinance. This type of refinance takes away all risk from the borrower to refinance.

Many people are skeptical of this because it sounds to good to be true. How can it be no costs, no points and no fees? It can be this way because the loan broker gets a fee from the lender for bringing a loan to that lender. The mortgage broker then takes this fee and pays all the costs and fees at closing including escrow, title and the appraisal. The mortgage broker makes his money from what is left over after the costs and fees are paid.

This type of loan is a win/win situation for everyone. The person getting the loan is saving money monthly plus not paying anything to get the savings. The mortgage broker is making a commission. The lender is getting a new customer.

When Does It Make Sense To Refinance This Way

As long as you save money it basically makes sense. Most experts will tell you that you need to drop 1% to make refinancing worthwhile. That is not true with a no costs, no points and no fees refinance. It is basically true if you are paying costs but if you pay nothing this is not true.

For example just a .5% drop in the interest rate can save you $105 per month:

With a NEG AM Loan (i.e. 1.0% or 1.25%) the monthly savings would be substantially greater.