You see promotions for them all the time but banking regulators have gone after lenders who misrepresent these loans. The reality is that no-cost and no-fee loans may actually cost the borrower more over the long term because costs are often hidden by rolling them into the new loan through higher principal or interest.
The rates on no-cost loans are usually about half or five-eights of a percentage point higher than the ‘full cost’ rate.
A typical no-fee loan includes points and all fees in the loan principal, so the borrower does not pay or ‘see’ these expenses at the closing. Instead, the borrower pays them over the life of the loan.
There are many options available. Talk to a mortgage broker to see what you qualify for and what’s available in your area.