ClosingCorp: Average closing costs accounted for less than one percent of the loan amount in 2020


The average closing cost to refinance a single-family home in 2020 was $3,398 including taxes – $2,287 excluding taxes – according to ClosingCorp, a provider of data and technology on residential real estate closing costs for the mortgage and real estate services industry.

Conversely, the average closing cost for a home purchase was $6,087 inclusive of taxes – $3,470 excluding taxes.

In its report, ClosingCorp notes that most states do not impose transfer and other local taxes on refinancing, nor are owners property insurance and some inspection fees typically required.

The national average closing tax bill was $1,111 for a refinance compared to $2,617 for a purchase transaction.

Most third-party fees, including lender title, settlement service and surveying, were also lower for refinancing, the report found.

On average, the only major fee that was higher for refinancing than for purchases was appraisals: $530 for refinancing versus $519 for purchase.

However, in 2020, valuations were waived for a significant percentage of refinancing transactions. For example, in August, the Urban Institute reported that waivers were accepted for 63% of interest/term refinancing and 26% for cash-out refinancing.

ClosingCorp’s refinancing cost calculations include the lender’s title policy, appraisal, settlement, withdrawal fees, and various state and local taxes. ClosingCorp uses home price data from CoreLogic to estimate the closing costs for an average home at the state level, core-based statistical area (CBSA), and county level. ClosingCorp uses ranges, rather than single values, to more accurately capture the fees associated with the real transactions.

“Our first national refinancing report analyzed data on more than 3.4 million single-family refinancing transactions that passed through our Fees platform last year,” said Dori Daganhardt, chief data officer of ClosingCorp. “If we take into account the fact that borrowers bought multiple lenders and other scenarios, this was nearly 40 percent of the total refinancing market for 2020. We report ‘market-specific’ rates and fees, not just network averages charged by the most active settlement service providers in any geographic area.”

“The Federal Reserve’s actions in 2020 created a unique opportunity to refinance regardless of the low interest rates you already had,” said Bob Jennings, CEO of ClosingCorp. “More than 6.7 million homeowners took advantage of this opportunity and refinancing volume increased by more than 50 percent.”

“The cost of all the services required to produce the average national housing refinancing loan was only 0.87 percent of the loan without taxes; 1.29 percent among them. So in 2020, homeowners could get a great deal on both interest rates and closing costs. In fact, the average borrower now saves more than $2,000 a year.”

Jennings attributed much of the cost containment to the increased use of technology by both lenders and settlement service providers, enabling the industry to scale capacity while controlling closing costs.

States with the highest average closing costs, including taxes, for 2020 were: District of Columbia ($13,722), New York ($8,256), Pennsylvania ($6,376), Washington ($4,687), and New Jersey ($4,645). The states with the lowest closing costs, including taxes, were: Missouri ($1,290), Indiana ($1,396), Arizona ($1,662), Arkansas ($1,785) and Iowa ($1,803).

States with the highest average closing costs, excluding taxes, were: New York ($4,420), Hawaii ($4,154), Texas ($3,494), New Jersey ($3,278) and Florida ($3,251). The states with the lowest closing costs, excluding taxes, were: Missouri ($1,290), Wisconsin ($1,371), Illinois ($1,374), Indiana ($1,396) and Michigan ($1,494).


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