Hows a no cost refinance work?

Usually the lender picks up the closing costs and doesn't charge you out-of-pocket for them, so you can leave the refi signing without having to write a check, but they always recover this money by giving you a slightly higher interest rate and/or more penalty fees. Ask the lender to price you the same loan without the no-cost option and see what rate you end up with; you might be surprised at how much lower rate you get.

with a no cost refinance what the lender is going to do is charge you a higher interest rate to recover the fee's normally established in the up-front closing costs. which typically does not benefit the borrower as you are going towards a higher interest rate. people like countrywide really market this loan to get people into the office or on the phone talking about they're scenario than will bait you to a more beneficial loan to you which has the closing costs up front-- or built into the loan amount. so regardless of a no cost refi- or a refi where you pay closing costs nothing should ever come out of your checkbook. or wallet. everything is built into the loan, and you get a lower interest rate with lower payment bringing costs into the loan so usually it's not the best idea to do a no cost re-fi.

Basically they are gonna charge you a higher rate to not only make money but cover your closing costs.
here is an article to show just how unwise this is and just how much it can relly cost you!

It is a marketing ploy to get more borrowers to refinance that in many cases shouldnt! They rarely make sense!