Buying a home involves more than just your down payment and monthly mortgage; there are also mortgage closing costs to consider. Understanding these expenses upfront helps you budget wisely and avoid last-minute surprises.
In this guide, we’ll cover what mortgage closing costs are, the types you’ll encounter, how to calculate them, expert tips to reduce them, and common mistakes to avoid.
What Are Mortgage Closing Costs?
Mortgage closing costs are the charges, taxes, and payments you make to complete your home purchase. Coming on top of your down payment, they are due when your mortgage “closes,” which means legal ownership is transferred. Closing expenses in Canada often range from 1.5% to 4% of the house’s purchase price.
Before signing a contract, it is imperative that you grasp these costs since they will significantly impact your closing required cash and influence the homes you can reasonably afford.
Types of Mortgage Closing Costs
Here is a breakdown of the most common categories of mortgage closing costs you’re likely to encounter, each playing a key role in completing your home transaction smoothly.
Costs and Disbursements of Law
Handling the legal transfer, registration, title search, and paperwork calls for an attorney or notary. Usually ranging from CAD $1,100 to $1,800 (or more depending on complexity), legal costs in Canada are normally covered.
Disbursements are out-of-pocket charges your attorney pays on your behalf (e.g., municipal searches, courier, and registration fees).
Provincial and Municipal Land Transfer Taxes
Provinces impose a land transfer tax (LTT) when property changes ownership; sometimes, cities also levy their own. The rate varies depending on the province and price band.
Some cities (e.g., Toronto) have additional municipal LTT. First-time homebuyers may qualify for rebates in certain provinces.
Assessment and Inspection Costs
Lenders usually need an appraisal to verify market value, often CAD $300 to $600. A house inspection is optional but highly advised. Recommended (roof, structure, systems), anticipate between CAD $300 and more, depending on property size and complexity.
Title Assurance
Title insurance shields your lender and you from ownership disagreements, title fraud, or errors in official records. A one-time fee, usually in the neighborhood of between $250 and $400 in Canadian dollars.
Fees In Connection With Mortgage Processing And Administration
Some lenders levy processing, underwriting, or administration fees depending on your mortgage; these could be fixed or a percentage of the loan amount.
Prepaid Expenses (Interest, Insurance, Taxes)
You might need to pay at closing:
- Property taxes or utilities: If the seller has paid some in advance, you reimburse them proportionally.
- Homeowner’s insurance: Beginning on closing day, you have to present documentation of your coverage.
- You may owe “adjusted interest” from the closing date until your first mortgage payment.
Other Potential Costs
- GST / HST or provincial sales tax (for newly constructed homes or extensive renovations).
- PST on the default insurance premium in some provinces.
- Survey or property survey, if not provided.
- Fees for review of condo or strata papers (for condos).
How to Calculate Your Mortgage Closing Costs
Here’s a simple example that demonstrates how to calculate your mortgage closing expenses for a typical Canadian home purchase.
Example situation:
- Purchase price of residence: CAD $500,000.
- Calculate the closing cost range using 1.5%–4%.
- Lower limit: 500,000 × 0.015 = CAD $7,500.
- Upper bound: 500,000 multiplied by 0.04 equals CAD $20,000.
Thus, concluding charges between CAD$7,500 and $20,000 may be anticipated.
Then separate it:
| Item | Estimate |
| Legal fees and disbursements | $1,200 |
| Land transfer tax (provincial + possible municipal) | $3,000 |
| Appraisal | $400 |
| Inspection | $500 |
| Title insurance | $300 |
| Prepaid property taxes/utilities/interest | $1,500 |
| Mortgage admin fees, etc. | $600 |
| Subtotal | $7,500 |
To perfect the estimate, you may additionally consult online mortgage closing cost calculators.
To clarify your estimate:
- Look over the land transfer tax schedule of your state.
- Request quotes from lawyers
- Affirm appraisal or inspection pricing.
- Ask the lender for a breakdown.
You will get a more accurate closing cost figure when your lender offers you a Loan Estimate (or related disclosure).
Tips to Save on Mortgage Closing Costs
Though many closing cost parts are required or fixed, you still have chances to reduce your payments:
- Look around for legal services, as different firms price differently. Negotiate after getting several quotations.
- Negotiate lender fees or admin charges. Request the lender to forgive or cut processing charges, or incorporate some expenses within their margin.
- Bundling could save you money if your lender, insurance, or broker provides several services.
- First-time purchasers frequently qualify for land transfer tax rebates or credits. Take advantage of government incentives/rebates.
- In a buyer’s market, demand that the seller bear a part of your closing expenses as part of the offer.
- Less prepaid interest will be owed if your closing date falls late in the month.
- Steer clear of pointless extras. Refrain from buying optional warranties or additions you don’t need.
- Choose a “no closing cost” mortgage option wisely. Some lenders offer to absorb closing fees in exchange for a higher interest rate, which is beneficial for short-term holds but can be expensive over time.
- Many purchasers greatly lower their closing cost load by being proactive and checking quotes.
Common Mistakes to Avoid
- Overlooking hidden fees: Small line items can sneak into closing documents. Review every charge carefully.
Budgeting only for the down payment: Don’t forget to factor in closing costs, which can add up quickly. - Not requesting a detailed breakdown: Always ask your lender for a full estimate of all costs upfront to avoid last-minute surprises.
Wrap Up
Understanding your mortgage closing costs is an essential part of becoming a well-prepared homeowner. By knowing what’s included, how to calculate them, and where you can save, you’ll make your home-buying journey smoother and more financially secure.
At Diverse Mortgage Group, we help you estimate your closing costs accurately, compare lender options, and find mortgage solutions tailored to your budget and goals.
Ready to simplify your mortgage process and save on closing costs?
Connect with the experts at Diverse Mortgage Group today to get personalized guidance, transparent cost breakdowns, and access to competitive mortgage rates.
Contact us now to make your home purchase seamless, informed, and cost-effective.
Frequently Asked Questions
Q1: Am I able to include closing costs with my mortgage?
Sometimes. Some lenders allow “no closing cost” mortgages, but they usually come with a higher interest rate, meaning you could pay more over time.
Q2: Should the transaction fail, are closing expenses returned?
Usually not. Fees for services like appraisals or inspections are non-refundable, so always review your offer contract carefully.
Q3: When should I make payments for closing costs?
They’re typically due on or just before your closing date, often within three business days, using a bank draft or certified funds.
Q4: Are closing cost amounts different from province to province?
Yes, they vary by province and municipality due to differences in land transfer taxes, legal fees, and rebates.
