When you refinance your mortgage, you usually pay off your original mortgage and sign a new loan. With a new loan, you again pay most of the same costs you paid to get your original mortgage. These can include settlement costs, discount points, and other fees. You also may be charged a penalty for paying off your original loan early, although some states (like our state: Illinois) prohibit this. The total expense for refinancing a mortgage depends on the interest rate, number of points, and other costs required to obtain a loan. To obtain the lowest rate offered, most mortgage companies will charge several points, and the total cost can run between three and six percent of the total amount you borrow. So, for example, on a $100,000 mortgage, the company might charge you between $3,000 and $6,000.
However, some companies may offer zero points - the trade off being a higher interest rate - this may significantly reduce your initial costs, but your payments may be somewhat higher.
Some companies will offer no closing cost or minimal closing cost options. This may free up additional cash for your remodel or to consolidate debts but again the cost is a higher rate. This is a perfectly acceptable trade off for some people - the key is being aware that the trade is happening. Working with a reliable, professional mortgage broker or loan officer is key. Make sure you are working with some one who will make sure that you understand your options (yes, you have options) and what the trade offs are so you can make an informed choice that will serve you in the short and long term.