Pros, cons of a no-cost refi

In today's market, paying points may be wiser

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The current refinance boom has focused attention on no-cost mortgages — henceforth NCMs — which have attractive features to refinancing borrowers. NCMs help borrowers avoid being overcharged, and they eliminate most of the uncertainty involved in determining whether a refinance will pay.

On the other hand, the price of NCMs — as measured by the interest-rate increase borrowers must pay to avoid refinance costs — is unusually high in the current market. The challenge is to obtain the benefits of NCMs without paying an excessive price for them.