Closing costs for homeowners who jumped on the refi wave in 2021 increased at less than one-third the pace of closing costs for home purchases as homebuyers had to cope with a hot market that fueled higher home-sale prices and related settlement costs.
The national average closing costs for a single-family property refinance in 2021 was $2,375, up $88, or 3.8%, from the previous year, according to CoreLogic‘s ClosingCorp. While refinance closing costs increased marginally, the bump was still less than 1% of the average refinance loan amount of $304,909 and below the national inflation rate of 7% in 2021, the report said.
Closing fees for nearly 5 million single-family refinances in 2021 were analyzed for the study, according to the tech vendor.
“Much of the cost control can be attributed to growing use of technology solutions by both lenders and settlement-services providers, which enabled the industry to scale up capacity while holding the line on closing costs,” Bob Jennings, executive of CoreLogic Underwriting Solutions, said in a statement.
Hawaii had the highest average closing costs for refinance loans, at $4,730 in Hawaii. New York ($4,679), Florida ($3,956) and Texas ($3,588) trailed. Refinance-cost calculations include lender’s title policy, appraisal, settlement, recording fees, and various state and local taxes.
By contrast, closing costs for the purchase of a single-family property in 2021 rose 13.4%, to $6,905, compared with the previous year.
HousingWire recently spoke with Westwood Insurance Agency’s Tom Kriby about how insurance issues can hold up a home closing and how lenders can integrate insurance into their process to help their homebuyers avoid delays.
Presented by: Westwood Insurance Agency
Homebuyers in certain locations paid more, such as New York, Delaware, and Maryland, where average closing fees exceeded $14,000. Washington, D.C., was the most expensive market for closing costs at an average of $29,888.
Closing costs include expenses related to paying off lender’s fees, underwriting mortgage loans and real estate commissions. The bulk of these costs are taxes involved with finalizing the sale of a new home.
The major difference between average closing costs for refinances and home purchases is that owner title insurance and several inspection fees common for purchase transactions are not required for refinances.
The increase in closing costs overall, which are now more than $1,000 more expensive than pre-pandemic levels, is largely due to lenders raising their fees to offset soaring loan-production expenses and the decline in business due to lower sales volume.
On average lenders originated 2.4 loans per month per production employee in the fourth quarter of 2021, compared with 3.6 loans in the previous quarter, according to the Mortgage Bankers Association.