Settlement Costs Definition

Settlement costs are fees or other expenses associated with settling a contract or debt. Settlement costs are almost always passed on to the borrower though they may be rolled up into the loan amount. Settlement costs are most frequently encountered during mortgage closing-also called mortgage settlement-where the borrower is expected to pay for the various expenses entailed in processing a mortgage.

Even if the seller is expected to pay some or all of the settlement costs, these costs are typically then passed along to the buyer in the form of a higher sale price. As settlement costs may vary tremendously, savvy mortgage shoppers will compare at least a few mortgage opportunities.