No-Closing-Cost Refinance: Is It Right For You?

Roman_Makedonsky/Getty Images: Illustration by Issiah Davis/Bankrate

When you refinance your mortgage, you can expect to pay closing costs just like you did with the first loan. If you’d prefer not to pay this expense upfront, you might opt for a no-closing-cost refinance, which allows you to finance these fees with your new loan. Here’s how to decide.

What is a no-closing-cost refinance?

In a typical mortgage refinance, the borrower pays a lump sum at closing to cover costs such as the lender’s origination fee and appraisal fees. In a no-closing-cost refinance, instead of paying these expenses upfront, the borrower pays them over time in one of two ways: Rolling the closing costs into the new loan, increasing the balance; or paying a higher interest rate.

Many lenders offer no-closing-cost refinances. Some offer a version of a no-closing-cost refinance, in which the lender will waive refinance fees for returning borrowers or charge a lower, flat rate instead of a percentage.

Average closing costs when refinancing your mortgage

The closing costs on a mortgage refinance for a single-family home average $2,403, according to a 2025 report from Lodestar. Refinance closing costs vary widely from state to state, however.

Your closing costs for a refinance are also typically less expensive than those for a home purchase loan. That’s because you’re not paying for homebuying closing costs like prepaid homeowners insurance or a settlement attorney. In many cases, you’re also only refinancing the remaining, lower balance of your original mortgage.

Some of the closing costs typically involved in a refinance include:

• Loan origination fee: Lenders usually charge an upfront fee to cover the cost of processing a new loan.
• Credit check fee: Your credit score and profile are a key part of the lender’s review of your application. Often, lenders pass on the cost associated with pulling your credit report to you.
• Appraisal fee: Lenders tend to require a home appraisal for a refinance to get a current assessment of what your home is worth.
• Title insurance: Even though you’re simply refinancing, a lender will still require title insurance to protect the new loan against any errors in the property records.
• Prepaid taxes: As part of the refinance closing process, you may need to prepay property taxes for the rest of the calendar year.
• Discount points: If you opt to buy down your interest rate as part of the refinance process, you’ll need to pay a fee to your lender.

Example of a no-closing-cost refinance

With a no-closing-cost refinance, you’ll either pay the fees as part of a higher loan balance or pay a higher interest rate. Here’s how both approaches work.

Say you’re refinancing a $200,000 mortgage to a new, 15-year loan with a lower interest rate. The process will cost you $2,000 in fees. You can hang onto that $2,000 and instead roll the expense into your new mortgage, financing $202,000 over 15 years.

You’ll pay a 6.2 percent rate on this higher balance, costing you a total of $108,769 in interest. If you didn’t finance that extra $2,000, you’d pay $107,692 in interest — a difference of $1,077.

Alternatively, your lender might waive the closing costs in exchange for a higher interest rate. If you were to pay 6.4 percent, for example, on $200,000 over 15 years, it’d cost you $111,623 in interest. At 6.2 percent, you’d pay roughly $3,900 less.

Either way, if you keep the loan longer term, you’ll end up paying the value of the closing costs — and more.

Pros and cons of a no-closing-cost refinance

Pros of a no-closing-cost refinance

• No upfront payment: There’s no need to come up with a few thousand in cash.
• Break even sooner: When you pay closing costs to refinance, it can take some time to break even with your new, lower monthly payment.
• Savings if you’re moving soon: No-closing-cost refis are often more expensive over the long term, but if you’re only going to have the home for a few more years, you won’t bear the full cost of the higher rate or bigger principal balance.

Cons of a no-closing-cost refinance

• Higher interest rate: Many lenders recoup your closing costs by charging a higher interest rate. This could be counterproductive if you’re refinancing to score a better rate.
• More expensive long-term: Whether it’s due to the higher rate or the increased principal, you’ll pay more interest than you would have if you’d paid your closing costs outright.
• Risk of triggering mortgage insurance: Rolling your closing costs into your new mortgage could also affect your loan-to-value (LTV) ratio. This could reduce your home equity to the point where you are now required to pay mortgage insurance, which adds to your monthly payment.

How to get the best no-closing-cost refinance deal

If you want to refinance your mortgage with no closing costs, it’s important to find the best deal for your situation. Here are some tips for getting the best low-cost refinance loan:

• Improve your credit score: Before you apply for refinance loans, check your credit score. If it’s low, you may struggle to be approved for a refinance or pay a higher rate. To boost your score, focus on paying your bills on time and avoiding unnecessary debt.
• Choose your loan term: When you refinance your mortgage, you’ll need to select a new loan term. Shorter loan terms have lower interest rates but higher monthly payments. With a longer loan term, your monthly payment will be lower, but you’ll pay more in total interest. Decide what makes the most sense for your financial situation.
• Compare rates from multiple lenders: Refinance rates can vary significantly between lenders. Before you get a new loan, shop around and compare the annual percentage rate (APR) from several lenders. Keep in mind that applying for multiple loans within a short period of time counts as a single hard credit inquiry, so it should have only a small impact on your credit score.
• Lock in your rate: If possible, lock in your quoted interest rate from the lender you choose. Even if interest rates fluctuate before your loan closes, you’ll still be entitled to the initial rate quote you received.

Who should use a no-closing-cost refinance?

A no-closing-cost refinance may make sense if you plan to move in, say, a year, and it will take two or three years to break even on your closing costs. Choosing a no-closing-cost refinance could save you money overall, even if you save less on interest than you might have otherwise.

On the other hand, if you plan to stay in the property for decades, and you’ll break even on your closing costs in just two or three years, then you’ll end up paying more in the long run with a no-closing-cost refinance.

If you want your lender to roll the closing costs into the refinanced amount, make sure that your total principal and interest payments are less than what they would have been had you paid the closing costs upfront. That’s not always the case.

Bankrate’s mortgage refinance calculator can help you determine the actual savings and costs of refinancing your current mortgage.

Other ways to lower refinance costs

Getting a no-closing-cost mortgage or a low-cost mortgage refinance isn’t the only way to lower your upfront expenses. Here are some other ways to pay less out of pocket:

• Ask about an appraisal waiver: Some lenders will waive the appraisal fee for existing customers or borrowers who have significant equity in their homes.
• Ask for a break on the application fee: If you’re applying with a bank where you already have accounts, ask if they’ll comp the application fee or other fees.
• Comparison shop for service providers: Ask if you can choose your own title company or appraiser. This could allow you to choose a lower-cost provider than your lender typically uses.
• Shop around for a lender: Most importantly, get quotes from multiple mortgage lenders, and make sure to compare all the different terms — not just interest rates, but closing costs and other fees, too.