Today, even a half-point drop in your loan's interest rate, with a zero/zero loan, is worth taking a look at. Why are banks offering these? Because of a new loan adjustment method called rebate pricing.

Instead of charging points and interest, loan officers are arranging loans that in the past would have been lower-interest loans. But they trade in a portion of the interest for cash up front, which is sometimes called a service-release premium. This cash up front is used to pay the closing costs. You never see those costs because they're folded into the loan itself.

There are homeowners today who are using this structure to get a new loan structure every year. And not only are they getting better interest rates each year, the mortgage brokers setting them up are making a very nice profit from the balance of the rebate pricing. It's the classic win-win situation.

The primary benefits of the zero/zero loan is that you have no out-of-pocket costs, yet you gain the advantage of lower rates without even hunting for them. No longer do you have to guess at where the interest rates will bottom out before refinancing; instead, you can refinance every year when rates drop just a little.You don't have to do a break-even analysis; instead, you just call your mortgage broker or bank and ask if there's a zero/zero available.

These loans work on both fixed and adjustable rate loans.

The primary disadvantage of a zero/zero loan is that you wind up paying a higher rate than you otherwise would have. If you have a loan that has a long payment term still in front of you, you're going to wind up paying more for the loan than you would if you had just waited and refinanced a little later, doing a breakeven analysis and paying closing costs, etc. If, however, you only have the loan for a little while longer, or if you are flipping a house or just plan to move soon, there's no disadvantage to a zero/zero loan; your breakeven point is far enough away that you probably wouldn't have refinanced at all under normal circumstances.

The cash that's paying for those closing costs is your money; the loan originators are betting you'll keep a loan for long enough that the money will be paid for in higher loan payments in the future. Refinancing the loans early means that the servicer and originator will lose money. But because of the way interest rates work on the back end, they may still profit from the refinancing, as the rates they pay for cash also drop.

Watch for one thing, though; the amount refinanced should be the amount you owe, not any increased amount. A few shady loan dealers have tagged the closing costs onto the principle of the loan, a slight increase in what you owe that you might miss if you're not watching for it.

If you have a loan that you'll be paying on for several years, it may be worth looking at other loan offers and considering paying the closing costs yourself, especially if it looks like interest rates may be bottoming out. By investing a little more money up front, you may be able to save yourself thousands in the long run.