Can you really refinance your mortgage without paying fees?

In a word, no. They say nothing is free, and certainly nothing that requires as many people and as much paperwork as a mortgage. When a mortgage refinance is offered as 'no fees', it really means that you just don't need to come up with the cash to pay the fees. There are dozens of fees that must be paid for any mortgage to get processed, and the cost is definitely, ultimately going to be passed on to you, the consumer.

Common mortgage refinancing fees

The fees for a mortgage refinance are essentially the same as the fees for a first mortgage. A refinancing doesn't really modify the first mortgage; it actually pays off the first mortgage and replaces it with a new one. In some cases, a refinancing may even mean new/additional fees. Here are some of the common costs associated with refinancing:

How no-fees mortgage refinancing really works

As you already know, 'no-fees mortgage refinancing' is actually a misnomer. Every mortgage has fees, and a refinance is actually a new mortgage which buys out the old one. In a 'no-fees' refinancing, the fees are baked into the product in one of two ways:

  1. Rolling in. Under this method, the mortgage fees are rolled into the loan and become part of the principal, increasing the size of the loan by the amount of the fees
  2. Higher rate. Under this method, the lender offers an interest rate which is slightly higher than the best rate a borrower qualifies for, and that extra interest becomes profit which offsets the cost of the lender fronting the fees on behalf of the borrower.