First Person: How Closing Costs Have Sky Rocketed Since 2010

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My husband and I are taking advantage of the low interest rates to refinance one of our rental properties. When the house had been refinanced back in late 2010 to deal with an upcoming balloon payment, the best interest rate we could get back then was 7.5%. Refinancing again would drop our interest rates to just 4% making it possible for us to double up the payments for a lower term.

What I wasn't expecting with this refinance was how closing costs have skyrocketed in just 2-1/2 years. Costs aren't just a little higher, they are significantly higher with nearly everyone from banks to title companies charging incredible fees.

One new fee that had my blood boiling is a $500 non-refundable fee which is charged if our loan is declined for any reason. While I understand a fee because we change our mind at the last minute, why on earth should we be penalized for something that's out of our control, such as a low appraisal? Here are a few other significant changes that have me gritting my teeth:

Increased title insurance fee. One significantly higher change was in how the title insurance and settling agent fees are now being divided up. In 2010, the bank bore most of the refinance settlement cost leaving us to pay a mere $125. Today, banks push more of the cost to the property owner. Our current closing costs include $1700 to the title company for both title insurance and settlement.

Increased appraisal costs. The last time my rental home was appraised, the cost was $280. The fee is now $585 which is more than double.

Increased recording fees. Even the county has upped the ante when it comes to recording loan documents. In 2010, we was charged only $19 to record the loan and title documents. As of today, the fee has jumped to $127.

Miscellaneous fees. In the fine print of closing documents are a whole passel of little fees that have to do with verifying property taxes, credit checks, flood certification fees and so on. These used to be small amounts that collectively added at most $20-30 to the closing costs. These required services now cost over $200.

Compared to our 2010 closing costs which were only $1435, we're now having to pay $3900 for a simple refinance. And that's not all. Banks are also requiring six month of payment reserves (and nine for rentals) in savings as a condition of approval. The higher costs and tougher standards mean that refinancing a property can no longer being done on a whim but now takes months of careful budgeting.

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