Q: I am considering refinancing my mortgage and home equity line of credit (HELOC). A number of lenders in my area are now offering loans that feature “no points, no closing costs, no fees and no hidden charges” when you refinance.

They further claim that they are satisfied with making money from the interest that is paid through out the life of the loan, and that there is no need to “stick it to you” during closing. Their web sites claim that the rates for these no fee loans are comparable to other big lender’s fixed rates.

What gives? Although I haven’t spoken to anyone at these companies myself, it sounds enticing (which makes me believe that there is something lurking in the paperwork to get even more of my money). Any advice on pursuing a refinance such as this would be appreciated.

Thanks in advance.

A: You won’t know what the deal is until you call. My experience, however, is that these lenders do “stick it to you” in hidden ways, such as boosting the interest rate on the loan.

You also need to know that very few lenders keep these loans inhouse. Portfolio lenders (those that keep a percentage of the loans they make in their investment portfolio) typically include local banks, some national mortgage lenders, savings and loans and sometimes credit unions.

All other lenders package up these loans and sell them on the secondary market to either Fannie Mae, Freddie Mac, or other investors, including hedge funds. The retail lender (the company that gives you the cash to buy your house) makes money by selling the “servicing rights” to your loan to one of these secondary market investors.

As you and I both know, there is no free lunch. No one is in business (especially a business that spends so much in advertising) to lose money. But you’re also not really going to know the score until you pick up the phone and call.

I suggest you call one of these “no cost” lenders and get the loan officer to itemize each of the costs in a 30-year fixed rate mortgage (or whatever mortgage program you’re interested in). Then, call three other lenders, including a big national lender, a local bank and a good mortgage broker. Get the costs and fees and interest rates from each for the same type of loan.

Only when you lay out the cost on an apples-to-apples basis will you begin to understand how much you’re spending and if these loans are really the best of the bunch.