Upfront Savings

• At the beginning of the new loan, you may have to pay various fees. Closing costs refer to the fees you have to pay at settlement and points refer to the percentage of the loan amount you have to pay upfront. You usually have to pay these fees as a lump sum. If you can't afford the entire amount, you may not be able to afford a refinance. Refinancing with no closing cost and no points, therefore, allows you to more easily afford the new loan.
  
  

Interest Rate

• When a lender charges no closing costs, the lender actually makes you pay the money over time by increasing your interest rate. Not paying points also increases your interest rate. The higher interest you pay makes up for the money the lender spends on covering your closing costs, so you end up paying the same or a higher amount than if you were to refinance with a loan that charges you closing costs and points.
  
  

Timing

• A no-cost loan saves you money at the beginning of the loan, but makes you pay the same or a higher amount over time. As such, you would benefit more from refinancing with no closing cost and no points if you plan to only have the loan for a short time. If you plan to keep the loan for a long time, you may be better off paying the closing cost and points. The amount of time beyond which you should not take out the no-cost, no-points loan depends on various factors, such as interest rate and loan type.
  
  

Considerations

• A loan with no closing costs and no points may help you compare between various lenders more easily because lenders can't hide the amount of your closing cost. You only have to consider the interest rate. If you plan to keep the loan for a long time but can't afford to pay the entire amount of closing costs and points, you may choose only a no-closing-cost loan, but pay the points to lower your long-term loan costs.