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When mortgage rates plunged to record lows in 2020 and 2021, many homeowners rushed to refinance. But those days are long gone. As of this writing, the average rate on a 30-year mortgage is 7.5%, according to Freddie Mac. For many homeowners, that’s more than double the rate they locked in a few years ago. So it’s easy to see why refinancing activity has slowed down tremendously.

Some mortgage lenders, however, may be offering free mortgage refinances in an effort to drum up business. A free mortgage refinance, or a no-cost refinance, is one where you aren’t charged closing costs.

Normally, the closing costs for a mortgage refinance can range from application fees to origination fees, and they can be quite expensive. A refinance can be more appealing when you don’t have to worry about those fees at all.

But even without having to pay closing costs, it’s hard to get around today’s mortgage rates. So for many people, even a free refinance won’t make sense. In the following situations, however, it could.

1. You’re actually able to qualify for a better interest rate

A big reason to refinance a mortgage is to lower the interest rate on that debt. If you locked in a 3% mortgage in 2020, then chances are, you’re not looking to swap that home loan with a new (and more costly) one today.

But what if you’re sitting on a much higher mortgage rate? It may be that you signed your mortgage before rates plummeted during the pandemic and at a time when your credit score wasn’t in particularly good shape. If that’s the case, it could be that today’s rates are actually lower than the rate you locked in, despite rates being elevated right now.

Normally, because there are closing costs involved in a refinance, it makes sense to try to shave about 1% off of your loan’s interest rate in the course of swapping an old mortgage for a new one. You want that savings to justify your closing costs.

However, if you aren’t being charged closing costs, you can be more flexible. If, for example, you have a mortgage at 8% and can refinance to 7.5%, it could pay to do so if there are no costs or fees involved.

2. You want to consolidate costlier debt

It may be that you’re sitting on a mortgage with a rate much lower than 7.5%. However, if you have a lot of non-mortgage debt that’s costing you a ton in interest, then it could pay to do a cash-out refinance, especially if you can snag one at no cost.

A cash-out refinance lets you borrow more than your remaining home loan balance. And you can use that excess cash to pay off other debts.

So let’s say you owe $60,000 on a bunch of credit cards with interest rates in the 20% to 24% range. Let’s also say you have a 5% mortgage rate on your current home loan. Even if you’re looking at refinancing to a rate of 7.5%, that might still make sense financially, because it could lower the interest rate on your overall debt and save you money that way.

A lot of homeowners aren’t so eager to refinance today, and that makes sense. But before you write off the idea, see if these two scenarios apply to you. If you can snag a new home loan with zero closing costs, going that route could pay off.

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