No money out of pocket does not mean no cost to the borrower
Absolutely not. We state this emphatically because many unscrupulous lenders try to entice borrowers to refinance with “no money out of pocket” sales pitches.
In many cases, all those lenders are doing is increasing your principal balance in order to bury substantial nonrecurring closing costs in that larger loan amount. You can increase your loan amount or principal balance to cover prepaid items like insurance, property taxes and interest even if you are getting a "no cost" loan, but should not be confused with increasing your loan amount to cover nonrecurring or one-time fees such titles, escrow, appraisal, underwriting, etc.
No cost loans typically involve a lender credit to cover one time fees associated with the refinance.