Obtaining a loan to purchase a house can be an expensive proposition. Frequently, people may be tempted to re-negotiate their older, higher rate mortgage when rates come down. It is important to consider this carefully and be sure any savings you have are not eaten up by the closing costs on the loan.

When a bank establishes a mortgage, it incurs expenses to do so. Many of these expenses are not under the control of the bank, but are merely passed along to it. There are, however, some fees that the bank itself charges, and therefore can change. And they do change them. In certain lending markets, banks may eliminate application fees, for example, in order to generate more loan business.

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In addition, there may be taxes to pay.

One of the first questions you may ask is whether or not you can reduce these costs. As we mentioned, sometimes lenders are aggressively seeking new clients, and they may have special programs where certain fees are waived. The application fee is the most often waived, since this is a charge the bank itself makes. Other fees, that are just pass-through fees, such as attorney fees or appraisal fees are not likely to be waived.

First of all, make sure the bank gives you a good faith estimate of these fees (they are required by law to do so.) Then you can analyze them. One of the hazards of being offered a lower rate may be that the bank inflates the closing costs to make up for the lower loan rate.

If you do find that any of the costs are not in line with standard rates (you can call another bank and ask them what their fees are-this will apply in some areas, such as an appraisal or a credit search, or you can file another application and get another good faith estimate), call them on it and request to negotiate the item.

Now you understand how much your closing costs are going to cost, and you have made some negotiations in reducing them, you can calculate if refinancing is really going to be worth it by using an online mortgage calculator to find out the costs remaining on your present loan.

To the total cost of the new loan, be sure to add the closing costs, since you will not have them if you stay with your present mortgage. Now you can decide if it is worth re-financing your home.

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