Mortgage lenders may be offering loans at record low rates, but that doesn't mean refinancing is cheap.

In fact, many borrowers may see much of the savings they would realize from lower interest rates wiped out by closing costs, fees that are on the rise as lenders seek to compensate their huge losses. This is one of the ways for lenders to increase profitability.

As homeowners rush to lock in historic low mortgage rates, lenders’ costs of doing business have increased. For example, whenever a lender locks in a rate for a prospective borrower, it incurs administrative costs, whether or not the loan actually closes. Should the borrower fail to get approved, change their mind or jump on a lower rate elsewhere, the lender is still on the hook for the costs. As these locks fall out, each loan gets more expensive for the lenders, so they have to pass on that cost to borrowers.

As a result, borrowers may encounter higher underwriting or administrative fees, along with higher charges from appraisers, mortgage insurers and Fannie Mae.

When shopping for a mortgage, ask lenders to provide you with written good faith estimates so you can compare costs and be familiarized with new fees. Here are four fees to watch for:

1. Processing fees
Whether they’re called administrative, application, underwriting or processing charges, these fees are on the rise as lenders compensate for the lower-rate loans that they offer to remain competitive with other lenders. A lender may offer a borrower a $150,000 loan at an attractive 4.5% and no points, for example, but slip in a $350 underwriting fee and a $350 processing fee, in addition to their regular application fee. While charging an application fee of several hundred dollars is normal, adding several other charges for the same amount of work is not. Be sure to compare several lenders’ fees, and question anything that seems redundant.

2. Fannie and Freddie’s Fees
On April 1 2009, Fannie Mae and Freddie Mac yet again increased fees for loans they purchase or insure. Depending on the borrower’s credit score and the size of the loan relative to the home’s value, these so-called loan-level price adjustments can range from 0.25% to 3% of the loan. Another 0.25% to 3% is added for cash-out refinancing (when a borrower refinances with a loan that's bigger than what they owe on their existing loan, so they have some cash left over).

For someone in the 660 to 679 credit score range, a 30-year fixed-rate mortgage that is 85% of the home’s value would incur 2.5% in fees. (Prior to April 1 2009, that same loan would have cost 1.75% in fees.) And if the borrower took cash out, another 2.5% would be added for a total of 5%.

To figure out if you may see these charges with these charges, ask your banker, lender or loan originator if your loan will be sold to or insured by Fannie or Freddie. Today, that’s the case for 56% of all outstanding mortgages.

3. Appraisal fees
Thanks to the Home Valuation Code of Conduct, a set of regulations on property appraisals that goes into effect May 1 2009, lenders who sell loans to Fannie Mae and Freddie Mac will be prohibited from selecting any appraisers. This may cause them to collect appraisal fees upfront no matter if the loan goes through or not.

If a borrower wants to refinance a home they think is worth $400,000, for example, but an appraiser values it at $300,000 and the loan can’t go through, the appraiser will still have to be paid. Remember Appraisers are always paid upfront.

Appraisers are also being required to use a new form that they estimate will add one hour to the time it takes to complete an appraisal. That will increase the cost of an appraisal.

4. Private Mortgage Insurance
As mortgage insurance companies move to so-called “risk-based pricing,” private mortgage insurance, or PMI, which is required of anyone purchasing or refinancing a home with less than 20% equity, is getting more expensive for borrowers with lower credit scores. Someone buying a $200,000 home with 10% down, for example, would pay $1000 a year in PMI if they had a 700 or higher FICO score, but if their score was 680, they'd pay $1,162 a year.