Mortgage closing costs: who pays what?
Closing costs can add thousands to the price of buying a home, and most buyers are unclear about who pays what. The rules vary significantly by country and even by lender. This guide breaks down every closing cost, who typically pays it, and where you have room to negotiate.
- US closing costs run to 2–5% of the loan, roughly $7,000–$17,500 on a $350,000 mortgage
- UK: buyer pays stamp duty, conveyancing, and survey; seller pays estate agent and their own solicitor
- Spain (since 2019): bank pays notary, registry, agency, and AJD; buyer only pays the appraisal
- Compare Loan Estimates from several lenders, because the fees vary a lot between them
- "No-closing-cost" mortgages exist, but the rate is higher: work out the break-even point first
- In slower markets, sellers often agree to contribute toward buyer closing costs
What are mortgage closing costs?
Closing costs are the fees paid at settlement, the moment ownership and the mortgage are legally transferred. They cover the cost of processing, underwriting, insuring, and registering the loan and the property transfer. In the US, closing costs typically run 2–5% of the loan amount. On a $350,000 loan that is $7,000–$17,500. Some costs are paid to the lender, others to third parties like title companies, appraisers, attorneys, and government recording offices.
Costs typically paid by the buyer / borrower
Appraisal fee, $300–$600: the lender requires an independent valuation of the property. Credit report fee: $25–$50. Loan origination fee, 0.5–1% of the loan: the lender's charge for processing the mortgage. Title insurance (owner's policy), $500–$1,500: protects your ownership against earlier claims. Prepaid items: homeowners insurance premium, property taxes escrowed upfront (usually 2–3 months), and prepaid mortgage interest from closing to end of month. Recording fees, $50–$250: charged by local government to record the deed and the mortgage.
Costs typically paid by the lender or seller
In the US, some costs are negotiable between buyer and seller. Sellers commonly pay: real estate agent commissions (traditionally 5–6% split between agents, though this is changing post-2024 NAR settlement), title search fees in some states, transfer taxes (these vary by state: sellers usually pay in New York, buyers in Florida). Lenders: since the 2015 TRID reforms, lenders must disclose all fees upfront in the Loan Estimate and cannot increase most fees at closing. Some lenders offer "no-closing-cost" mortgages where they cover fees in exchange for a higher interest rate.
UK: who pays what when buying a home
In the UK, the buyer pays: Stamp Duty Land Tax (or LBTT in Scotland, LTT in Wales), conveyancing solicitor fees (£1,000–£3,000), property survey (£400–£1,500), and mortgage arrangement fee (£0–£2,000 depending on the product). The seller pays: their own conveyancing solicitor and estate agent fees (1–3% of sale price). One important difference from the US: there is no formal title insurance market in England and Wales, where the conveyancer handles the title search and provides indemnity insurance if issues arise.
Spain: the 2019 mortgage law changed everything
Before Spain's Mortgage Law reform in June 2019, buyers paid practically everything: notary fees for the mortgage deed, property registry fees, processing agency fees, and AJD (Stamp Duty on the mortgage). The Supreme Court ruling and subsequent law shifted responsibility: since 2019, the bank pays the mortgage notary deed, property registry inscription of the mortgage, processing agency, and AJD. The buyer now only pays: the property appraisal (€250–€600) and their own copy of the purchase deed. This saved buyers several thousand euros per transaction.
How to reduce your closing costs
Shop multiple lenders: closing costs vary significantly between lenders. The Loan Estimate (US) or Key Facts Illustration (UK) lets you compare costs line by line. Negotiate with the seller: in slower markets, sellers often contribute to buyer closing costs to close the deal. Consider a no-closing-cost mortgage: you pay a slightly higher rate but nothing at closing, which makes sense if you expect to sell or refinance within five to seven years. Ask about lender credits: paying a higher rate in exchange for credits toward closing costs. Compare title insurance companies: in states where you choose your own, prices vary by 30–50%. Challenge the appraisal fee if the first quote seems high, because several appraisers compete for the work.
Frequently asked questions
Who pays closing costs?
Mostly the buyer, although sellers often pay agent commissions and some local taxes, and lenders may cover some fees.
What is the Closing Disclosure?
In the US, the document listing final loan terms and costs, which you must receive at least three business days before closing.
Who pays mortgage costs in Spain?
Since the 2019 mortgage law, the lender pays the notary, registry and management costs of the mortgage, and the borrower pays the appraisal.
How can I lower closing costs?
Compare lenders, ask for fee waivers, shop for title and other services, and negotiate seller credits.