Well folks, you'd be surprised. About ten years ago, various mortgage brokers were offering an innovative refinance program - no points and no closing costs. In a nutshell, in exchange for a slightly higher interest rate, borrowers could take a loan and pay absolutely no fees whatsoever.

Let's talk about closing costs. In most areas, one might expect to have to fork out about $2,000 in fees to refinance a $200,000 mortgage. Appraisal - $300. Settlement Fee - $300. County recording fees - $400. Underwriting fee - $300. Processing fee - $200. Title Insurance - $750. The list goes on.

Now, before zero cost programs, the homeowner would have to wait until interest rates were low enough to justify the closing costs. Remember that closing costs are never refundable so the new rate has to be low enough that you will recoup the costs in a reasonable period of time.

This isn't necessary with the zero cost programs. Because the borrower pays no out-of-pocket expenses and doesn't raise his loan amount, any monthly savings are immediate. There's no recoup time.

There's an old rule of thumb that I still hear some "experts" preaching: "It doesn't make sense to refinance unless you can lower your interest rate by two percent or more". The emergence of zero cost programs throws this rule out the window.

Actually, back in the days when you not only had closing costs to pay, but also origination fees and discount points, this rule made plenty of sense. The assumption is that since it's so incredibly expensive to refinance your home, the new rate must be significantly lower to achieve a big drop in payment.

As of June 4th, long term rates edged down a bit. In fact, depending upon where you live and your loan balance, a zero cost 30 year fixed rate could be below seven percent.

So what does that mean? It means that anyone who's sitting at 7.50 percent, or even 7.25 percent, may want to consider refinancing. Let's see, a $200,000 loan at 7.50 percent results in a principal and interest payment (P&I) of $1,398 per month. At seven percent, the payment drops to $1,330 - that's $68 less. It may not seem like much, but over five years, for example, you save over $4,000 - not bad. Since you paid nothing for the refinance, your savings are immediate.

You may also find some adjustable rate and balloon programs with zero cost options. A 5/25 balloon, for example, is hovering in the mid-sixes with no cost. This would be great for any homeowner who's planning to sell their house within five years.

The bottom line here is that a conversation with a good loan officer might pay off and save you some money.

One caveat - the rate on zero cost refinance programs will increase as the loan amount drops. So for those folks with small mortgage balances, perhaps $100,000 or less, the zero cost option may be hard to find.