Closing Costs
The fees and charges paid to complete a real estate transaction — lender fees, title, escrow, recording, taxes, and prepaids. On investor loans they typically run 2–5% of the loan, on top of the down payment.
Closing costs are the fees and charges required to complete a real estate purchase or refinance, paid at closing on top of your down payment. They bundle together everything from lender fees to title and government charges, and they're a real part of the cash a deal requires — easy to underestimate and important to budget.
What's typically included
Lender charges
- Origination fee / points — often the biggest line on investor loans
- Underwriting, processing, document prep, application fees
Third-party services
- Appraisal or BPO
- Title insurance (lender's and owner's policies) and title search
- Escrow / settlement / attorney fees
- Survey, inspection, credit report
Government & prepaids
- Recording fees and transfer taxes
- Prepaid property taxes and insurance, and any initial escrow deposit
- Per-diem interest from closing to the first payment
How much to expect
On investor loans, closing costs commonly run 2–5% of the loan amount — but the range is wide because the origination points on hard money can push them higher. On a $200,000 loan, 3% is $6,000, separate from your down payment.
| Cost category | Rough share |
|---|---|
| Lender fees + points | Often the largest |
| Title + escrow | Moderate |
| Government/recording/transfer | Varies sharply by state |
| Prepaids (taxes, insurance, interest) | Varies by timing |
Closing costs in your cash-to-close
Your total cash needed is down payment + closing costs + reserves. Forgetting closing costs is a classic way investors come up short at the table. They also factor into your cash-on-cash return, since they're part of the total cash invested.
Investor-specific notes
- Points dominate on short-term loans. On a flip, origination points can be the largest closing cost — and because the hold is short, they're a big slice of total financing cost.
- Some costs roll into the loan. On many investor loans, points and fees are deducted from proceeds rather than paid out of pocket, reducing net funding instead of requiring extra cash. Confirm which.
- Refinances have closing costs too. A cash-out or rate-and-term refinance carries its own closing costs, which must be justified by the rate improvement or cash extracted.
- State variation is real. Transfer taxes and recording fees differ dramatically by state — a deal's closing costs in one market won't match another.
Always get a fees worksheet or loan estimate up front and compare lenders on total cost — rate plus points plus all closing costs over your expected hold — not on any single number.
Frequently asked questions
How much are closing costs on an investment property loan?
Commonly 2–5% of the loan amount, though hard money loans can run higher because of origination points. On a $200,000 loan, that's roughly $4,000–$10,000, separate from your down payment. The exact figure depends on the lender's fees, your state's transfer taxes, and prepaid items.
Can closing costs be rolled into the loan?
On many investor loans, points and certain fees are deducted from the loan proceeds rather than paid out of pocket, which reduces your net funding instead of requiring extra cash. Some costs must still be paid at closing. Confirm with your lender which costs can be financed and which can't.
Are closing costs part of my cash-to-close?
Yes. Your total cash needed at closing is the down payment plus closing costs plus any required reserves. Closing costs also count toward your total cash invested when calculating cash-on-cash return, so they directly affect both how much you need and your return on the deal.