When buying a home, many people focus solely on saving for the down payment. While this is essential, overlooking the additional closing costs can leave you scrambling for funds at the last minute. Properly budgeting for closing costs ensures a smoother home-buying process and avoids unnecessary stress.

What Are Closing Costs?

Closing costs are the fees and expenses you must pay in addition to the down payment when finalizing your home purchase. These costs typically range from 1.5% to 4% of the home’s purchase price and may include:

• Legal Fees: For processing the transaction and registering the mortgage.
• Land Transfer Tax: A government tax based on the property’s value, with rebates available for first-time buyers in some provinces.
• Home Inspection Fees: To ensure the property is in good condition.
• Title Insurance: Protects against issues with the property’s title.
• Appraisal Fees: To confirm the home’s market value for the lender.
• Adjustment Costs: For prepaid property taxes, utilities, or condo fees.

The Risks of Overlooking Closing Costs

Failing to budget for these expenses could lead to:

1. Last-Minute Financial Stress: Scrambling to cover costs you didn’t anticipate.
2. Delays in Closing: If you cannot pay the closing costs, the transaction could fall through.
3. Relying on High-Interest Loans: Borrowing at the last minute could add unnecessary financial strain.

How to Budget for Closing Costs

1. Estimate Your Costs Early: Work with your real estate agent, lawyer, or mortgage agent to calculate the expected closing costs for your specific situation.
2. Save Extra Funds: Aim to save at least 2%-4% of your home’s purchase price to cover closing costs.
3. Explore Rebates and Incentives: If you’re a first-time buyer, check if you qualify for land transfer tax rebates or other government programs to reduce costs.
4. Include Costs in Your Mortgage Plan: If you can’t pay these costs upfront, discuss with your mortgage agent about incorporating them into your mortgage.

Real-Life Example: The Cost of Closing

Imagine purchasing a $500,000 home. At 2%–4% for closing costs, you’d need an additional $10,000–$20,000 on top of your down payment. If you haven’t budgeted for this, you may struggle to secure the funds, jeopardizing your home purchase.

Why This Matters

Budgeting for closing costs is just as important as saving for a down payment. By planning ahead, you’ll avoid last-minute surprises and ensure a smoother home-buying experience.

Read the full list of the top 10 mistakes to avoid when getting a mortgage here: Top 10 Mortgage Mistakes

Have Questions? Let’s Talk.

If you’re unsure about the closing costs for your home purchase, I can help you create a realistic budget and plan for success. Call me at 613-318-6315 or schedule a call here: Book a Call.

Let’s ensure you’re financially prepared for every step of your home-buying journey.

-Phil