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A true no-cost refinance means you pay no money upfront and neither your loan amount nor your interest rate is increased to build any costs into your new loan. To calculate a break-even point, divide the anticipated total cost of your refinance by the monthly savings on your loan payment.
The biggest upfront expense comes in the form of closing costs, which can be anywhere from 2% to 5% of the loanâs value. If youâre refinancing a $200,000 loan with closing costs of 3%, youâd have to bring $6,000 in cold hard cash to the closing table. If you havenât built up enough equity in the home, youâll probably get stuck paying for private mortgage insurance (PMI) when you refinance.