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Unfortunately, mortgages aren’t free. There are always fees associated with getting a mortgage. Usually, these closing costs are thousands of dollars in total. Instead of having to cut a check at the time of the loan’s closing, there’s a way for you to add that amount to the loan and then not have to pay a thing when you’re refinancing your loan. The result of this is a no closing cost refinance, which many lenders offer.

The only catch to this is that you’ll tend to have to accept a higher interest rate over the entire life of the loan. In order to find these mortgages, you can use Bankrate to find the lowest available mortgage rate that’s out there.

There are two main ways that someone will get a no closing cost refinance. This is when either the bank decides to waive the fee (which is very uncommon) or when the person getting the loan refuses the fee and then is given the no closing cost refinance, often at a higher interest rate.

There are several fees and premiums that are added into the closing costs of the loan. While these vary from state to state, they have been on the rise overall over the years.

No closing cost mortgages are pretty attractive to those who can’t pay the fee upfront but who are willing and able to make their monthly payments at a higher interest rate. Waiving the closing cost might truly be the only way for some people to get the mortgage on that new house or to refinance what they’ve got.

Another thing that factors into which you should choose is how long you plan on living in the house. If you’re planning on leaving after five years, then you should definitely not pay the closing costs. It can take more than five years to recoup the closing costs, so this should only be done with caution.

This slightly higher mortgage rate that is associated with a no closing cost mortgage is still most likely going to be less expensive over those five years than what you’d end up paying with the closing costs.

It’s all about that magic five-year limit. If you’re going to be there for four years at a 6.5% rate, for instance, you still should refuse the closing costs. Once you cross that threshold of five years, you might want to consider paying the closing costs associated with the mortgage on the house.

Paying a slightly higher interest rate in order to forgo the closing costs will also make sense if you’re going to need that cash to make renovations on your home. These renovations could ultimately lead to an increase in overall value for your home, which is another added benefit for not paying the closing costs upfront.

If you do plan on spending more than five years in the home you’ve chosen, then a no closing cost loan will probably end up costing you more than a loan with the closing costs added. That’s the same whether you’re taking out a new mortgage or are refinancing something that you already have.

You’ll typically break even on those closing costs over a couple of years. Going with that no closing cost loan could potentially cost you in the future since this interest rate will be added onto the rest of the home loan. That can and will cost you much more down the line, especially if you’re keeping the house for a long period of time.

Unfortunately, mortgages aren’t free. There are always fees associated with getting a mortgage. Usually, these closing costs are thousands of dollars in total. Instead of having to cut a check at the time of the loan’s closing, there’s a way for you to add that amount to the loan and then not have to pay a thing when you’re refinancing your loan. The result of this is a no closing cost refinance, which many lenders offer.

As we’ve seen here, there are some catches when it comes to no closing cost loans. These loans will be most effective for those who are keeping the house for less than five years or so since it takes longer on average to recoup those costs. Keep these thoughts in mind when you’re looking to take out a mortgage.