Understanding Mortgage Closing Costs

Why Closing Costs Often Catch Buyers by Surprise

When budgeting for a home, most buyers focus on the down payment and mortgage approval. But there’s another essential piece of the puzzle: closing costs. These are the additional expenses you’ll need to cover before you can officially take ownership of your new home.

Closing costs typically range from 2% to 5% of the purchase price, depending on location, lender requirements, and property specifics. Underestimating these costs can lead to last-minute financial strain.

At Optimize, we ensure closing costs are built into your financial plan from the start—not an unwelcome surprise at the finish line.

What Are Closing Costs?

Closing costs are the one-time fees and expenses associated with finalizing your home purchase and mortgage transaction. They are separate from your down payment and include:

• Legal and administrative fees.

• Taxes and adjustments.

• Mortgage-related charges.

• Home-related services required for closing.

These costs are paid at or before the closing date and are essential for transferring ownership and securing financing.

Key Components of Closing Costs

1. Legal Fees and Disbursements
Your real estate lawyer (or notary) handles the legal work of transferring property ownership, registering the mortgage, and conducting title searches. Fees typically range from $1,500 to $2,500 depending on complexity.

2. Land Transfer Tax (LTT)
A significant cost, this provincial (and sometimes municipal) tax is based on the property’s purchase price. First-time buyers may qualify for rebates. The amount varies by province and city.

3. Title Insurance
Protects against property ownership issues like fraud, encroachments, or title defects. This one-time premium is often required by lenders, costing around $300 to $500.

4. Property Tax and Utility Adjustments
If the seller has prepaid property taxes, utilities, or condo fees, you’ll need to reimburse them for the portion applicable after your possession date.

5. Appraisal Fee
Some lenders require a professional appraisal to confirm the property’s market value. Appraisals typically cost $400 to $600.

6. Home Inspection (Optional but Recommended)
Though not a lender requirement, a home inspection is crucial for assessing property condition. This usually costs $400 to $700.

7. Mortgage Insurance Premium (If Applicable)
If your down payment is less than 20%, the mortgage insurance premium (e.g., CMHC fee) is often added to your loan amount. However, provincial sales tax on this premium (in certain provinces) must be paid in cash at closing.

8. Miscellaneous Costs
Courier fees, document registration charges, and minor lender admin fees may also apply.

Optimize ensures you understand the full range of costs relevant to your specific transaction—not just generic estimates.

Why Closing Costs Are Essential to Plan For

Failing to account for closing costs can lead to:

• Cash flow stress at closing.

• Needing to dip into emergency funds.

• Delays in property transfer if funds are short.

Lenders require proof you have sufficient funds for both the down payment and closing costs before finalizing your mortgage approval. At Optimize, we make sure you’re fully prepared.

How Optimize Helps You Plan for Closing Costs

We support you by:

• Providing a personalized closing cost estimate early in the process.

• Identifying all applicable rebates (e.g., first-time buyer land transfer tax rebates).

• Ensuring closing costs are factored into your overall financing strategy.

• Coordinating with legal professionals to keep everything on track for closing day.

With Optimize, you’ll never be blindsided by unexpected costs. We make closing cost planning a seamless part of your home buying journey.