ClosingCorp says its first national refinance closing cost report shows that average closing costs for a single-family residential property refinance last year totaled $3,398 including taxes and $2,287 excluding taxes.
In contrast, closing costs for the average home purchase in 2020 amounted to $6,087 including taxes and $3,470 excluding taxes. The major differences: most states do not impose transfer and other local taxes on refinances nor is owner title insurance and a number of inspection fees typically required.
The national average tax bill at closing was $1,111 for a refinance as compared to $2,617 for a purchase transaction. Most third-party fees, including lender title, settlement service and land surveys were also lower for refinances, the report found.
On average, the only major fee that was higher for refinances than for purchases was appraisals: $530 for refinances vs. $519 for purchase.
However, in 2020, appraisals were waived on a significant percentage of refinance transactions. For example, in August, the Urban Institute reported that waivers were accepted on 63 percent of rate/term refinances and 26 percent on cash-out refinances.
“The Federal Reserve’s actions in 2020 created a once-in-a-generation opportunity to refinance, no matter how low a rate you already had,” says Bob Jennings, CEO of ClosingCorp. “More than 6.7 million homeowners took advantage of this opportunity, and refinance volume jumped by more than 50 percent.
“The cost of all the services needed to manufacture the average national residential refinance loan came to just 0.87 percent of the loan without taxes; 1.29 percent with them. So, in 2020, homeowners were able to get an amazing deal on both interest rates and closing costs. In fact, the average borrower is now saving more than $2,000 annually,” he adds.
Jennings attributes much of the cost control to the increased use of technology by both lenders and settlement services providers, which enabled the industry to scale up capacity while holding the line on closing costs.
The 2020 report shows the states with the highest average closing costs, including taxes, were: the 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).
The 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).
