Closing costs are taxes, fees, and professional services that are paid in cash in the final weeks before closing, separately from the down payment.
According to Scotiabank, they typically amount to 1.5–4% of the purchase price. On a $750,000 home, that’s $11,250–$30,000 on top of the down payment.ctvnews+3
5 items that most often “hit your wallet”
1) Land Transfer Tax (tax on transfer of title)
- This is usually the largest closing-cost item; the tax is paid in full on closing day.ctvnews+1
- In Ontario, first-time buyers can get a rebate of up to $4,000 on the provincial tax; this fully covers the tax on the first ~$368,000 of the price.statetakehome+2
- In Toronto, a municipal tax (MLTT) is added with a separate rebate of up to $4,475; in total, first-time buyers in the city can receive up to $8,475.bestrates+1
- The criteria are stricter than they seem: you must be a first-time buyer (never have owned real estate), be a citizen/resident, occupy the home as your primary residence within ~9 months, etc.firsthomeguide+1
2) Mortgage default insurance and PST on it
- With a down payment <20%, you pay mortgage default insurance; with a 5% down payment, the premium is 4% of the loan amount (CMHC).
- The premium is usually added to the mortgage, but in Ontario, Quebec, and Saskatchewan a provincial tax (PST/QST) is charged on it, which cannot be rolled into the loan—it is paid in cash at closing.
- On a $19,000 premium, this can mean a four-digit out-of-pocket amount on closing day.
3) Lawyer, inspection, appraisal, title insurance
- Legal fees and disbursements, a home inspection, an appraisal for the bank, title insurance, and a title search—these are all small but mandatory payments that add up to several thousand dollars.ctvnews+2
- Unlike the insurance premium, these costs are not “rolled into” the mortgage and are paid in cash before closing.ctvnews+1
4) Adjustments, moving, and the “first month”
- At closing, you reimburse the seller for amounts they prepaid (most often property taxes, sometimes utilities).ctvnews+1
- The move itself (movers, service hookups, locks, blinds, appliances, first repairs) falls in the month when your account is already at its most depleted.ctvnews+1
5) A separate fund for closing costs
- The best protection is to treat closing costs as a separate savings goal: set aside an additional 2–3% of your target purchase price and keep this money somewhere liquid and safe, separate from your down-payment fund.ctvnews+1
- If you use an FHSA or RRSP through the Home Buyers’ Plan, don’t count the entire amount as available for the down payment: first set aside the amount for closing costs; what remains is your real down payment.
Practical checklist (what to include in your budget)
- Land Transfer Tax: check the rate in your province and whether there are rebates for first-time buyers (Ontario/Toronto/BC have programs; Quebec, Alberta, Manitoba usually do not).financeguides+2
- PST/QST on mortgage insurance: if your down payment is <20% and you’re in ON/QC/SK, plan a cash payment of the tax on the premium.
- Lawyer + title + inspection + appraisal: budget $2,000–$3,500 total (depends on the province and the type of transaction).pragmatic+1
- Adjustments and moving: add a buffer for prepayments and logistics; often that’s another $1,000–$3,000+Total: plan for 1.5–4% of the purchase price as a separate “cash” line item, without mixing it with the down payment.
