WICHITA, Kansas, Mar 3, 2008 -- Whether it's new or a refinance, getting a home mortgage is more than a hassle, it's expensive. According to the Department of Housing and Urban Development, lender fees alone on a $100,000 mortgage average $3,000.

That cost concern isn't lost on the mortgage industry, of course. That's one reason why you see a flurry of advertising offering low- or no-cost mortgages. But is there really help behind all the hype? To find out, you have got to understand how banks and other lenders make money on mortgages.

One way is closing costs: Origination fees, application fees, processing fees. The list is long.

But lenders also make money on the interest rate: The higher rate you pay, the more they make. So if the lender promises low closing costs but then raises the rate on the mortgage, you could end up worse off.

Say you borrow $200,000 on a 30-year mortgage. If you get a 6.5% rate, you pay $255,000 in interest over that 30 years. Pay 7% and interest will cost you $279,000. So paying a reduced rate of $395 in fees costs you $24,000 in interest.

The bottom line? Before you respond to an ad for low- or no-closing costs, do the math. Want a better idea? Shop for the lowest interest rate then pit lenders against one another to negotiate fees as low as possible.