No-closing-cost refinance vs paying the costs: free up front, paid for every month
A "no-closing-cost" refinance is not free. The lender pays the fees and charges a higher rate for the life of the loan, which is a lender credit by another name (CFPB). The alternative, rolling the costs into the new balance, is also not free: the fees are repaid with interest. This page prices the three ways of paying for one refinance with the mortgage refinance break-even calculator and finds the month at which each stops being the best choice.
The example
- Current loan. $350,000 owed at 7.50%, with 27 years (324 payments) left. Principal and interest: $2,522.57 a month. For context, the Freddie Mac survey's average 30-year fixed rate was 7.03% as of September 24, 2026 (Freddie Mac PMMS).
- Offer 1, costs in cash. 6.50% over 30 years, $8,000 of closing costs paid at closing. Payment $2,212.24.
- Offer 2, costs rolled in. The same 6.50%, with the $8,000 added to the balance: the new loan is $358,000. Payment $2,262.80.
- Offer 3, lender-paid. No closing costs, at 6.875%, 0.375% above the priced rate. Payment $2,299.25.
- Cash earns 4%. Whichever path pays less in a month invests the difference, and Offer 1's $8,000 is money the other paths invest instead of spending.
The rate premium for lender-paid costs is an assumption. Lenders price the credit against their own rate sheet, and the only reliable figure is the Loan Estimate for each offer, which lists the costs and any lender credit on the same page (CFPB: Loan Estimate).
Three offers, side by side
"Ahead" is each refinance's lead over keeping the old loan if you sold or paid off at that point, counting what has been paid, what is still owed and the cash invested along the way.
| Saving a month | Break-even | After 1 year | After 3 | After 5 | After 10 | After 15 | Held to the end | |
|---|---|---|---|---|---|---|---|---|
| Costs in cash, 6.50% | $310.33 | Month 30 | -$4,778 | +$1,897 | +$8,864 | +$27,347 | +$46,615 | +$90,500 |
| Costs rolled in, 6.50% | $259.76 | Month 32 | -$4,987 | +$1,254 | +$7,762 | +$24,989 | +$42,846 | +$81,796 |
| Lender-paid, 6.875% | $223.32 | Day 1 | +$2,208 | +$6,756 | +$11,461 | +$23,687 | +$35,885 | +$56,819 |
The lender-paid offer has nothing to earn back, so it is ahead of the old loan from the first month and ahead of both priced offers for years: by +$6,756 after 3 years against +$1,897 for cash. Open the lender-paid scenario.
What it gives up is 0.375% on the rate for 30 years. In month one that is $109.38 of extra interest on $350,000, and the gap compounds. Paying the $8,000 in cash overtakes the lender-paid rate in month 86 (7 years 2 months) and never looks back; by 15 years it is +$46,615 ahead of the old loan against +$35,885. Rolling the costs in overtakes the lender-paid rate in month 106 (8 years 10 months). Open the cash scenario at 10 years · the lender-paid scenario at 10 years.
Rolling the costs in
Offer 2 borrows the $8,000 at 6.50% for 30 years. The payment is $50.56 a month higher than Offer 1's, which over the full term is $18,202 for $8,000 of fees. It is behind the cash offer at every point in the table by roughly that growing amount, and its break-even is Month 32 against Month 30 for cash. Open the rolled-in scenario.
It is still the better of the two ways of not writing a check. Against the lender-paid rate it loses the first 8 years 10 months and wins everything after, because the extra cost is a fixed $8,000 with interest, not 0.375% on the whole balance for 30 years.
The term reset in each offer
All three restart a 30-year clock on a loan with 27 years to run. Paid on schedule to the end, the old loan costs $467,312 of interest. The priced offers still come out ahead of that: $446,406 (-$20,906) in cash and $456,609 (-$10,703) rolled in. The lender-paid offer does not: $477,730, +$10,418 more than keeping the old loan, because 6.875% for three extra years outweighs the cut from 7.50%. Counting interest alone its lead is gone by month 318 (26 years 6 months); with the saving invested at 4% it ends +$56,819 ahead, which is the return on the investments, not the loan. The calculator's "keep the old payment" switch removes the reset from any of the three; Is refinancing worth it for a 1% lower rate? shows what that does.
Which to choose
- Likely to sell or refinance again within about 7 years 2 months: lender-paid. There is nothing to earn back, and the premium has not yet cost more than the fees.
- Staying longer: pay the costs, in cash if the money is there. The rate is what you pay for 30 years; the fees are paid once.
- No cash to spare: rolling the costs in beats the lender-paid rate after 8 years 10 months and keeps the lower rate.
A borrower who expects rates to fall is in the first group whether or not they plan to move: refinancing again ends the loan, and with it the payback on anything paid up front. That is the same calculation as points versus a lender credit on a purchase loan, worked through in Lender credit or no points?.
Assumptions and limits
- Fixed-rate loans throughout, interest charged monthly at one-twelfth of the annual rate. Each refinance takes exactly today's balance, plus the costs when they are rolled in.
- The 0.375% premium for lender-paid costs is an assumption, not a quote. The method works with any pair of offers; enter the rates and costs from your own Loan Estimates.
- The return on cash is one constant annual rate for every cash difference between the paths. It is an input, not a forecast.
- The break-even month is the first month from which an offer stays level or ahead of keeping the old loan to the end of the comparison. The crossover months between offers are computed the same way, offer against offer.
- Pre-tax: no mortgage interest deduction, no tax on investment returns. Property tax and insurance are the same under every offer and are left out.
Method and sources
The model is calculateRefinance in the
mortgage refinance break-even calculator. Each loan is amortized month
by month with the standard fixed-rate payment formula. An offer's lead over keeping at a month is
every cash difference to that month, closing costs included, grown at the return, plus the old
loan's balance minus the new one's. The crossover between two offers is the first month from which
one offer's lead stays at or above the other's. Every figure above comes from running the model on
the inputs in the scenario links.
- CFPB: How should I use lender credits and points?: a lender credit lowers closing costs in exchange for a higher rate.
- CFPB: Loan Estimate explainer: the form that lists closing costs and lender credits.
- Freddie Mac, Primary Mortgage Market Survey: 30-year fixed-rate average of 7.03% as of September 24, 2026.
Open this scenario in the calculator
All figures on this page come from the Mortgage Refinance Break-Even calculator. Change any input there and the numbers update.