A lender credit comes from the rate-versus-cost tradeoff built into every loan, and pushed far enough, it can cover your refinance fees entirely. Every loan has a par rate, the point where the lender neither charges points nor pays a credit. Go below par and you pay to buy the rate down. Take par or a touch above, and the lender pays a credit back to you. Push the credit far enough and it covers your actual loan costs, the lender and title fees, so you close the refinance with nothing out of pocket for the loan itself. Jeb did exactly this on a recent refinance. At an illustrative par rate of, say, 6 percent, he could have paid to go lower. Instead he took the par rate, collected a credit that more than covered his loan costs, and paid nothing for the loan. One distinction to keep straight: a lender credit covers loan costs, and prepaid items are separate. You'll still fund things like a few months of property-tax impounds up front. Those are your own money going into the new escrow account rather than a fee, and your old escrow balance gets refunded after the payoff, so it washes out. A true zero-cost refinance is easiest to reach on a larger loan in a low-closing-cost area, because a bigger balance generates more credit at a given rate. On a smaller loan in a high-cost state, getting all the way to zero can be tough, though a low-cost structure is often still available. Ask any lender to show you the same loan at par with the credit applied, so you can see the tradeoff plainly.