Closing expense is paid when you close on the purchase of property like home or any other. It is associated with transferring your property to your buyer or vice versa. As a common practice closing expense for buyer are added to mortgage amount or paid as additional down payment, where else in case of seller closing expense are subtracted from the settlement check.

Some time if you are lucky you may come across an eager seller who may pay all your closing expense along with his. However most of the time it doesn’t happen and buyer pays the majority of expense.

Closing expense
Closing expense

In this article I am listing the most common closing expense you may have to pay while buying or selling a house  

    Mortgage point

    It’s the money paid by buyer to lower the mortgage payment. There two types of mortgage points origination point and discount point. Each mortgage point is equal to 1% of the mortgage amount for instance let’s consider that mortgage amount is $ 100,000 then buying 1 mortgage point will cost you $1000

    Origination point is compensation for loan officer. Discount point is prepaid interest, purchasing each point will reduce your mortgage payment by 0.25%. Considering the above example if you bought 3 point it will reduce your mortgage payment by 0.75%.

    It’s mostly beneficial when time period of your loan is loan for example 30 years. Because in just  few years you would even the amount you paid to buy the mortgage point. But is you are going to stay for few years mortgage points are not worth it.

    Paid by: - buyer

    Loan origination fee

    It’s just an administrative fee paid for processing new loan application. It ranges around 1-2% of  the loan amount.

    Paid by: - buyer

    Credit report

    Around $ 50 are paid by buyer for credit report when loan is first applied for.

    Prepaid interest

    It is the interest owed by the buyer for the part of the month after closing date. To avoid this expense what you can do is that close on the last day of the month.


    The 1st payment to the buyer’s escrow account is used to collect partial payment for insurance, property tax and pay them when they are due.

    Title insurance

    It is the insurance which protects the lender and homebuyer if there is any defect in the title of the property.

    Paid by: - either buyer or seller

    Recording fee

    It is the fees paid to record the transfer of ownership

    Paid by: - often seller


    It is the cost of having a professional evaluator to evaluate the current value of the house. The cost is mostly around 300 to 450 dollars.


    Fees to determine the house’s property line. May cost $150 to $350

    Paid by: - buyer or seller

    Pest inspection

    Ensure pest free house cost around $125

    Paid by: - buyer

    Property taxes

    Most property taxes are paid one year after they are incurred i.e. property tax of 2011 is paid in 2012. So seller has to pay six months or a year’s worth of property tax to settle bills.

    Insurance policy payment

    Buyer pays for one year of insurance in advance or brings proof that insurance for the house has been purchased. 

    Read about the budgeting lessons related to buying house 

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