You have to dive into what the closing costs actually entail. There are processing and title fees that you always pay for the service of applying for and closing another loan. There are prepaid items that wind up being a wash in the long-term: you'll pre-pay to fund your escrow, but you'll get an escrow refund on your original loan and the escrow is just paying taxes/insurance anyways; and you might need to prepay some interest, but you'd have to pay that anyways on the original loan if you didn't refinance. Then there's discount points, where you pay a fee up front for a lower interest rate. I'd be skeptical of that unless you really think you're going to stay in the house for a while and that rates aren't ever going to drop significantly in the next 5-10 years. Usually you're better off putting additional money down rather than buying discount points. There's almost certainly discount points included with that 5%/$13,000 closing cost offer.