My little obsession on mortgage rate
But is that the case? The problem with a no cost refinance, just as with so many types of refinance that look good at the beginning, is that the lender recoups the money it loses on fees by charging you a higher interest rate. A traditional refinance usually has a lower interest rate than a no cost refinance. Ultimately, this can lead homeowners to pay more in interest than they would have paid in extra fees (but still less than they would if they hadn't refinanced at all). For this reason, homeowners are often advised to take out a no cost refinance only if they can afford to make higher monthly payments than the terms of the loan require, thereby paying off the loan before interest has time to accrue. There are also several other good reasons to opt for a no cost refinance despite the interest rate.