Refinancing a home mortgage loan has become a common financial transaction, and for good reason. Refinancing, which is basically taking out a new mortgage and using the proceeds to pay off an existing mortgage, can be financially beneficial in a number of ways. When interest rates drop, refinancing to a loan with a lower interest rate can easily save borrowers thousands of dollars over the life of their mortgage loan. Refinancing is also a great way to tap into home equity to finance an event like college or a wedding.

While the benefits realized from refinancing can be considerable, it is important to consider the total mortgage refinance cost before beginning the refinance process. Refinancing costs are similar to the costs incurred when purchasing a home; specific costs vary a bit depending on the state in which you live, but typical mortgage refinance costs will likely include:

• An appraisal fee ($200 - $500), which pays for a professional appraiser to determine your home's market value;

• A credit report fee ($40 - $70), which allows the lender to obtain a current copy of your credit history;

• An application fee ($50 - $300), which the lender charges to accept your mortgage loan application;

• Loan origination fee (varies), which the lender may charge you to process your loan application;

• Loan points (varies), which allow you to pay upfront to reduce the interest rate associated with your mortgage;

• Escrow fees ($200 - $600), which are charged by an escrow company to handle the finances during the processing of your mortgage loan;

• Attorney's fees ($100 - $500), which an attorney charges to help with the contracts and/or the closing of your mortgage loan;

• Title search and insurance fees ($400 - $800), which pay for an investigation into the title history of your home and insure against any claims on the title;

• Wire transfer fees ($30 - $60), which are charged by financial institutions for moving money around in the course of the refinance.

Since the total mortgage refinance cost can be considerable, it is important to carefully estimate all of the components of the cost of refinancing in advance. Only then can you weigh the predicted mortgage refinance cost against the savings from lower interest rates or the benefits obtained from refinancing. Once you have performed this cost-benefit analysis, you will know if a mortgage refinance is the right move for your financial future.