A No Closing Cost Refinance Loan means I cover all non-reoccurring closing costs (NRCCs), which are costs specific to the process of the refinance: Appraisal, Title, underwriting fees, etc.

However, a no closing cost refi does not necessarily mean no out-of-pocket cash at closing. You are still responsible for the interest that is due to your old lender as well as the interest due to the new lender (at the new rate) for the rest of the month – this is called “per diem” interest. Also, if you impound your taxes and insurance there will be a buffer that is collected at closing by the new lender. You pay interest every day you have a loan. If you didn’t refinance you would pay the interest when you make your monthly payment, however the difference here is the point of payment. In addition, you will receive 100% of your impound balance from your old lender after closing, and you will skip the next mortgage payment following the closing. We can discuss adding the interest and the impound buffer amount to the principal of your loan if that is a better option for you.

Bottom line: if you choose to pay interest and impounds at closing, your principal will not change nor will you have any NRCCs – truly a no closing cost loan and one that you can repeat over and over, guilt-free, to take advantage of even slightly improving mortgage rates. Remember interest on your mortgage is paid in arrears; therefore your payment on the 1st of each month pays the lender for the previous month of interest.

Lastly, when we close I reconcile the numbers for my clients so you can easily follow each dollar from the payoff vs. the new loan amount vs. the closing costs. Everything is completely transparent and seamless.