A no closing cost refinance is essentially a kind of refinance loan that can allow you to not have to pay any up-front closing costs when your loan is made. While this may seem like a great deal it is often times a pseudo cost savings mechanism because the lender of a no closing cost refinance loan will typically compensate for the no closing costs with a higher interest rate. Many borrowers that follow-up on no closing cost refinance loans don’t even realize that the lender is doing this, and in the end just move on none the wiser.

For this reason, no closing cost mortgage refinance loans have come under an extraordinary amount of criticism lately, with many critics stating how they borderline on flat-out scams and deceptive lending practices. Most lenders do actually deliver on the no closing cost part of the promise, but they fail in the regard that they deceive their borrowers by boosting their interest rate by sometimes as much as a full point. It is more common for them to subtlety increase the rate by a quarter or half point without the borrower knowing, but this all depends on the particular lender at hand.

Not all lenders that offer no closing cost loan products deceive their borrowers and there are actually some who can make a good deal for their borrowers by saving them some money. The problem is that the number of lenders that do offer legitimate no closing cost products are in the minority, and the majority that offer these sorts of home loans will not hesitate in compensating for the no closing costs via a boost in the interest rate or some other hidden cost.

The fundamentals of a no closing cost refinance loan are pretty much identical to your typical refinance loan. A homeowner with a mortgage, or mortgages may choose to refinance their current mortgages and obtain a new loan. The refinance loan is made in accordance with the borrower’s credentials and other information and if approved by some lender, he or she will receive a new home loan for the amount remaining on the mortgages against the property. This can give a borrower a single monthly payment if they might have had multiple mortgages on the home, and it can give the borrower a better interest rate if they can demonstrate the appropriate qualifications to the lender.

Refinance loans are great for taking advantage of lower interest rates and they have become one of the more common home loan products on the market. A no closing cost refinance abides by the same rules as a conventional refinance loan except for the fact that the lender will not charge any up-front costs or any closing costs for the note. As was stated previously the lender will not charge anything for the closing costs but they will then hike up the interest rate by a small amount without ever telling the borrower. They can easily get away with this most of the time, and unless the borrower has done some serious shopping around so that they can gain a firm grip on the kind of interest rate that they are supposed to receive, they will most likely walk away never knowing that they are in reality paying more for their money by choosing the no closing cost refinance loan.

Some lenders that provide these types of loans do provide a legitimate loan product but the vast majority of time they will only be using the no closing cost refinance to get you in the door. It really is more of a marketing tactic than a distinct loan product, and it is something that needs to be cleaned up before the problem gets even worse. If you are still thinking about looking into a refinance loan with no closing costs then you must take caution because these loans will cost you more when compared to a conventional refinance loan. Do your own research and don’t hesitate to run the numbers if you are ever in doubt if you are saving money. In the end it is about getting the best deal, and just be aware that you don’t have to go with a no closing cost refinance loan to get a good deal.