Closing costs
Also called: settlement costs
Closing costs are the fees and charges paid to complete a mortgage and home purchase, separate from the down payment. They can include appraisal and title fees, government taxes, and prepaid items such as property taxes, homeowners insurance and interest.
By Beacon · Updated
How it works
Some closing costs pay for services connected to the loan, such as an appraisal, a tax service provider or title insurance. Others are government taxes. Prepaid items cover costs that start right away, such as property taxes, homeowners insurance and the interest due before your first mortgage payment. As the buyer you generally pay these costs, though the purchase contract or state law may have the seller pay some of them.
Credits can lower the cash you bring to closing without making the costs go away. A seller who agrees to a credit toward your closing costs will usually want a higher price for the home, and a lender credit typically comes with a larger loan amount or a higher interest rate. Either way, the costs are still paid, just through the price or the loan rather than in cash at closing.
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Sources and further reading
Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.