No-Cost Loan

Definition - What does No-Cost Loan mean?

A no-cost loan is a type of mortgage refinancing option, where the lender pays all the associated fees and not the borrower. There can be several legally required fees related to a transaction of this nature including processing and transaction fees. As an incentive to pick one lender over the other, the lender will shoulder all the fees. Most refinancing fees are based on a set rate, but other parts of the fee can be based on the amount financed.

Justipedia explains No-Cost Loan

The law requires that commissions charged in a no-cost loan agreement cannot be more than a set amount and all calculations carried on within the refinancing would be governed by the federal standard at the time. The no-cost loan option is attractive to mortgage buyers, as it is cost-beneficial.

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