Closing costs buyers forget to budget

Closing day · 6 min read

First-time buyers pour all their attention into the down payment and the mortgage, then get blindsided on closing day by a stack of bills nobody walked them through. Closing costs — the taxes, fees, and adjustments you pay when the home legally becomes yours — commonly land at roughly 2 to 4 percent of the purchase price on top of the down payment. Here is where that money goes.

The big ones

Land transfer tax

This is usually the largest closing cost. Every province charges it (called different names in different places), and some cities add a second one — Toronto charges its own municipal land transfer tax on top of Ontario's. First-time buyers often qualify for rebates or full exemptions, but the rules and caps vary by province, so confirm what applies to you. This is the line item most worth researching early, because it can swing by thousands of dollars between cities.

Legal fees and disbursements

A real estate lawyer handles the title search, the transfer of ownership, and the mortgage registration. Legal fees plus disbursements (searches, registrations, courier costs) typically run in the low thousands. Budgeting a flat estimate and confirming the quote in writing before closing day avoids a surprise line item.

Title insurance

A one-time policy that protects you against title defects — fraud, unknown liens, survey errors. It is a few hundred dollars in most cases, and many lenders require it. Small, and worth having.

Property tax and utility adjustments

If the seller prepaid property taxes or utilities past your closing date, you reimburse them for your share. The amounts are pro-rated to the day, and they can be a four-figure line item if closing falls right after a tax instalment.

The ones people skip

• Home inspection — a few hundred dollars paid before closing, not at it. It is the cheapest insurance in the whole transaction: it finds the $15,000 roof before the house is yours.
• Appraisal — your lender may order one to confirm the home is worth what you offered. Some lenders cover it; some pass the few hundred dollars to you.
• Condo status certificate — for condos, a package of the corporation's finances and rules, with a fee in the low hundreds. Read it; it reveals special assessments coming down the road.
• HST on new builds — new homes carry HST, though federal and some provincial rebates offset part of it. Resale homes generally do not carry HST on the price, though it applies to some services.
• Moving costs — movers, deposits, utility hookup fees, a locksmith, window coverings. Real money, and it all lands in the same month as everything above.

How to estimate yours

1. Get a written fee estimate from your lawyer early — ask for "all-in including disbursements."
2. Look up your province's land transfer tax and any first-time buyer rebate, plus any municipal add-on (Toronto buyers, this means you).
3. Ask your lender what fees they charge and whether they order an appraisal you pay for.
4. Add inspection, title insurance, status certificate if applicable, and a realistic moving budget.
5. Pad the total by 10–15%. Closing-day numbers drift upward; they never drift downward.

General information only, not financial or legal advice. Taxes, rebates, and fees vary by province and municipality — verify the current figures for your location before finalizing a budget.