Closing Costs Explained
August 3, 2026 5:09 pmWhat Every First-Time Home Buyer Should Budget For
One of the biggest surprises for many first-time buyers isn’t the purchase price—it’s everything that comes after.
Most buyers focus on saving for their down payment, only to discover there are additional expenses required before they can receive the keys to their new home. These are known as closing costs, and they can add up to thousands of dollars.
The good news? None of these costs should come as a surprise.
By understanding them in advance, you’ll be able to budget with confidence and avoid unnecessary stress during the final stages of your purchase.
What Are Closing Costs?
Closing costs are the legal, administrative, and government fees paid when your home purchase is completed. Most of these expenses are due on closing day and are in addition to your down payment. As a general rule, buyers should budget approximately 1.5% to 4% of the purchase price, depending on the property and its location.
1. Land Transfer Tax
For most buyers, this is the largest closing cost. If you’re purchasing a home in Ontario, you’ll pay the Ontario Land Transfer Tax. If the property is within the City of Toronto, you’ll also pay the Toronto Municipal Land Transfer Tax. This means Toronto buyers pay two land transfer taxes.
Fortunately, many first-time buyers qualify for rebates that can reduce this cost significantly.
First-Time Buyer Rebates
Eligible first-time buyers may receive: Ontario Land Transfer Tax Rebate and Toronto Municipal Land Transfer Tax Rebate. Combined, these rebates can save eligible buyers up to thousands of dollars. I’ll help you determine whether you qualify.
2. Legal Fees
Every home purchase requires a real estate lawyer. Your lawyer will:
• Review legal documents
• Register your ownership
• Transfer funds
• Pay applicable taxes
• Coordinate with your lender
• Ensure the transaction closes properly
Legal fees typically include:
• Lawyer’s professional fees
• Registration fees
• Administrative costs
• Disbursements
Although every lawyer is different, budgeting approximately $1,500–$2,500 is a reasonable starting point for many residential purchases.
3. Title Insurance
Title insurance protects both you and your lender against certain legal issues involving the property’s ownership. It can provide protection against problems such as:
• Title fraud
• Unknown liens
• Survey issues
• Clerical registration errors
Unlike home insurance, title insurance is generally purchased once and remains in effect for as long as you own the property.
4. Home Inspection
Although not every purchase includes a home inspection, it’s often one of the best investments you’ll make. A qualified inspector evaluates the property’s condition and identifies potential concerns before you become the owner. Depending on the property, an inspection may include:
• Roof
• Foundation
• Plumbing
• Electrical
• Heating and cooling systems
• Insulation
• Moisture concerns
The cost of an inspection is small compared to discovering major repairs after you’ve moved in.
5. Property Appraisal
Sometimes your lender may require an independent appraisal to confirm the property’s market value before approving your mortgage. This protects the lender by ensuring the property supports the amount being borrowed. Not every mortgage requires an appraisal, but it’s wise to budget for the possibility. Many lenders will include the appraisal cost with a new mortgage.
6. Adjustments
On closing day, you may reimburse the seller for expenses they’ve already paid. These can include:
• Property taxes
• Utility charges
• Condo fees
• Fuel oil or propane (if applicable)
Your lawyer will calculate these adjustments and include them in your closing statement.
7. Home Insurance
Before your mortgage can be finalized, your lender will require proof that the property is insured. Home insurance protects your investment against events such as:
• Fire
• Water damage
• Theft
• Storm damage
• Personal liability
Your insurance policy typically begins on closing day.
8. Moving Costs
This expense is easy to overlook. Depending on your move, you’ll need to budget for:
• Professional movers
• Packing supplies
• Storage
• Utility hookups
• Cleaning
• Furniture delivery
Planning these expenses in advance helps make moving day much less stressful.
9. Utility Connections
You’ll also need to arrange services for your new home, including:
• Hydro
• Natural gas
• Water (where applicable)
• Internet
• Cable or streaming services
Some providers may charge connection or account setup fees.
Ready to Buy with Confidence?
Understanding closing costs is one of the best ways to avoid surprises during your home purchase. If you’re planning to buy your first home, I’d be happy to walk you through every expense you’ll encounter and help you build a realistic budget.
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