The Ultimate Guide to Closing Costs

The Ultimate Guide to Closing Costs

Closing costs can be overwhelming if you don't know how to handle them. This is why I have taken time to breakdown for you each costs that are important for you to know when buying your home, especially if you are a first time home buyer.

Here you go:

Real Estate Lawyers

Of all the things you need to do during your home buying process, working with a trustworthy real estate lawyer (or notary in Quebec) could be the most important. Your lawyer will calculate the majority of your closing costs and will facilitate the transaction between you, the seller, and the bank on closing day. With this in mind, it’s important to work with someone you trust from the minute you’re ready to buy.

What does a real estate lawyer do?

A real estate lawyer has one job: to make sure all of your paperwork and transactions are filed and completed accordingly.

This job might sound easy but includes everything from reviewing your offer to purchase and conducting a title search for you, to registering the home in your name and making sure all of your payments are made in full and on time. They will conduct accurate research to ensure that the title and ownership are finalized properly and that all facts and figures are correct. Knowing the complexity of the transaction, it’s a good idea to find a lawyer who specializes in real estate.

When do I work with a real estate lawyer?

As soon as you are ready to sign an offer to purchase, you should involve a real estate lawyer. Because it’s a legal contract, and the implications of breaking it could be costly, it’s important to have someone clarify all of the terms before you sign.

A few days prior to closing day, you’ll meet your lawyer to complete your mortgage and title documents. Your job on this day is to give your down payment (minus your deposit) to your lawyer, along with any other remaining closing costs. Your lawyer’s job is to ensure all of your payments are made and that all of your paperwork is signed and filed. When everything is completed on closing day, your lawyer will give you the deed and the keys to your new home.

What should I look for in a real estate lawyer?

When choosing a real estate lawyer or notary, it’s a good idea to work with someone who:

  • specializes in real estate
  • has experience with the type of property you are buying
  • lives or works in a convenient location for you to meet them

Don’t be afraid to ask lawyers about their experience, and their fees, before agreeing to work with someone.

How much will I be paying in legal fees?

Lawyer/notary fees depend on the complexity of the transaction as well as their expertise. Most start with a base legal fee, which often varies with the type of home you are purchasing (detached, condo, etc.). From there, you can expect to pay for disbursements—faxing, photocopying, and carrier fees—and registration fees like title registration, title insurance, and registering the deed.

Closing Costs: What Are They and How Much Will You Pay? - Ramsey

What is the difference between legal fees and disbursements?

Legal fees are what a lawyer charges for serving on your behalf. Essentially, they are service fees used to cover the overhead needed to run their business, which includes rent, insurance, equipment, and other dues.

Disbursements, on the other hand, are expenses the lawyer charges you for any out-of-pocket expenses they have had to pay ahead of time for you. Disbursements may include faxing, photocopying, carrier fees, municipal tax searches, and title registrations you have asked your lawyer to complete.

What’s the difference between title registration and title insurance?

When you pay a title registration fee, you are simply paying for your lawyer to change the ownership of the home from the seller’s name to yours in all municipal, regional, and national systems.

Title insurance, however, is purchased to protect your ownership in the event that an undetected title defect is found. Possible defects include but are not restricted to: violations of municipal zoning by-laws, existing work orders, encroachments on adjoining property, realty tax arrears, and more. Should something come up, title insurance protects you from having any liability.

Both title registration and title insurance fees are paid at the time of closing.

What other payments will I be making on closing day?

On top of paying legal fees, you will be handing over a number of other payments to your lawyer/notary. First, you will pay the remainder of your down payment. To do this, subtract your deposit and pay whatever is leftover.

Second, you’ll need to be ready to pay the land transfer tax, they vary by province and actually needs to be given to your lawyer before closing day.

On closing day, your lawyer will submit your land transfer tax to the appropriate government office.

Are there any other fees I should know about?

Even though mortgage default insurance is added to your mortgage balance and paid off through your mortgage payments, buyers in Manitoba, Ontario, and Quebec are responsible for paying PST on CHMC insurance at closing. Your lawyer may also ask for an underwriting fee for processing the default insurance application. Finally, if the seller has prepaid their property taxes, any utilities, or HVAC contracts, you will need to pay them back a prorated amount from the day you take possession to the day they have paid up to.

How do I find a real estate lawyer?

The best ways to find a real estate lawyer are to ask for recommendations from your agent, family, friends, and lenders you are working with and trust. A good reference is worth more than any amount of publicity you find online, so ask around.

Statement of Adjustments

On closing day, your statement of adjustments is created displaying any credits to the buyer or seller, and the final amount payable by the buyer on closing day. Both the buyer’s and seller’s lawyers will prepare their own statement and will then combine them, creating the one final statement of adjustments.

What is listed on the statement of adjustments?

The statement of adjustments lists any amounts that need to be adjusted against the purchase price. It will include:

  • the purchase price
  • your deposit
  • any prepaid property taxes, utilities or fuel (oil) adjustments

Statement of Adjustments

This example assumes the seller has prepaid some of their property taxes, which the buyer will need to pay back to the seller.

 Credit PurchasersCredit Vendors
Purchase Pirce (excl. GST/HST)   $370,000.00
Deposit $10,000.00  
Prepaid Property Taxes    
2016 taxes paid to date   $2,960.00
Seller's share for 73 days   $592.00
Credit owed to seller   $2,368.00
Balance Due on Closing to Seller   $362,368.00
Totals $372,368.00 $372,368.00

What does a statement of adjustments look like?

You don’t need to be an accountant to understand the statement of adjustments. There are two columns: credit purchaser and credit vendor. Credit purchaser typically includes amounts you’ve already paid, like your deposit. Credit vendor includes anything that needs to be paid to the seller, like pre-paid expense adjustments and the sale price.

The two columns have the same total; the amount paid and the amount received are the same. The total amount in the credit vendor column—purchase price + prepaid adjustments—is what the seller must be paid on closing day. Subtract the deposit you’ve already paid and that’s what you owe on closing day.

Buyer’s Trust Ledger Statement

This example assumes the buyer bought a home in Ontario.

Received mortgage loan from lender   $322,368.00
Closing costs    
Down payment (after deposit has been paid)   $40,000.00
Ontario Land Transfer Tax   +$4,600.00
Title Insurance Fee   +$500.00
Legal Fees and Disbursements (incl. HST)   +$1,500.00
Total   $46,600.00
Paid to seller on closing 362,368.00  
Paid Ontario Land Transfer Tax $4,600.00  
Paid Title Insurance Fee $500.00  
Paid Legal Fees and Disbursements (incl. HST) $1,500.00  
Totals $368,968.00 $368,968.00


What is a trust ledger statement?

Both the buyer and seller receive a trust ledger statement, to show all expenses for the buyer and all remaining expenses for the seller. In the case of the buyer, after completing the statement of adjustments, the full amount payable to the seller is then moved over to the trust ledger statement.

The trust ledger statement shows all of the money involved in the transaction on closing day, but includes other costs like legal fees. Similar to the statement of adjustments, there are two columns for debits and credits.

The debits column includes the full amount payable to the seller plus land transfer tax, title insurance, legal fees, and disbursements. Depending on the type of home you are purchasing, other fees may also be on the trust ledger statement. For example, if you’re buying a new home, the new home warranty enrolment fee and HST may also be on your statement.

The credits column includes the mortgage loan you’re getting from your lender and any extra amount you’re paying yourself.

The debits and credits columns should total the same amount, showing exactly how much must be paid out and where your money is going on closing day.

How interest rates work and what triggers a rate change

Interest Adjustment

You have to pay interest accrued between your closing date and the date your first scheduled mortgage payment comes out. Otherwise known as an interest adjustment, this one-time interest charge has to be paid on the Interest Adjustment Date.

Let’s say you just bought a home and your mortgage payments are due on the 1st of each month. If you bought your home for $300,000 on the 15th of October, your lender has to advance you your mortgage loan on that date. But, even though you won’t be making your first payment until November 1, interest starts to accrue on the 15th of October.

Using the example above, and assuming a 2.99% fixed rate, the interest adjustment would be $368.

Example: $300,000 Purchase Price

$300,000 Purchase Price x 2.99% Interest Rate ÷ 365 Days Per Year x 15 days

= $368.63

What is an Interest Adjustment Date?

The Interest Adjustment Date (IAD) is the date by which you must pay your interest adjustment. Set by the lender, the IAD is often the day your mortgage loan is advanced and/or is almost always before the day your first mortgage payment comes out.

To avoid paying an interest adjustment, you can attempt to schedule your closing as close to the adjustment date as possible.

How do I pay my interest adjustment?

There are a number of ways to pay your interest adjustment. You can pay it at closing, either by paying your lender directly or getting the lender to deduct it from your mortgage loan before they advance it to you. You can ask your lender to make a one-time withdrawal from your bank account, before your first mortgage payment comes out. Or, if the lender allows it, your interest adjustment may also be added to your first regular mortgage payment.

Land Transfer Tax

When you buy property or take the transfer of a property’s title, you have to pay a Land Transfer Tax (LTT). The LTT is a provincial tax that all provinces have, except Alberta and Saskatchewan, who instead levy a small fee.

You can also get rebates on your LTT here in British Columbia.

How much you pay depends on the province you live in and the value of your new home. If you’re buying a home in British Columbia, for example, you pay 1% on the first $200,000 and 2% on anything extra over $200,000. If your home was $300,000, that would look like:

First $200,000 x 1% = $2,000

Remaining $100,000 x 2% = $2,000

$2,000 + $2,000 = $4,000 total land transfer tax

British Columbia land transfer tax

Purchase PriceMarginal Tax Rate3
On the first $200,000 1.0%
$200,000 to $2,000,000 2.0%
$2,000,000+ 3.0%

In BC, on a $200,000 home, your land transfer tax ($200,000 x 1.0%) is $2,000.

BC first-time homebuyers are also eligible for a land transfer tax rebate of the full LTT amount, if the home is less than $475,000.

Title registration fee

Base fee of $50 + additional $1 for every $5,000 of the property’s fair market value, rounded up to the nearest $5,000.

Mortgage registration fee

Base fee of $50 + additional $1 for every $5,000 of the principal amount of the mortgage.

On a $200,000 home, you’ll owe ($50 + ($1 x 40)) + ($50 + ($1 x 40)) approximately $180.

GST & HST on New Homes

If you’re buying a newly built home, you may have to pay GST or HST on the purchase price, depending on your province.

When getting ready to buy, pay attention to whether or not the purchase price says GST/HST is included or is payable—every builder lists this differently. For example, given “$329,000 incl. HST” or “$329,000 + HST,” the difference is an extra $42,770 in Ontario (13% HST).

GST/HST New Housing Rebate

If your new home is priced at no more than $450,000 (before GST/HST), you may be eligible for a partial rebate of the 5% GST, so long as it’s going to be your primary residence.

The GST/HST New Housing Rebate amount you can receive changes proportionately, based on the purchase price of the home. For example, the rebate for homes valued at $350,000 or less reduces the GST paid from 5% to 3.5%. The rebate gradually reduces for homes in the $350,000–$450,000 range and there is no rebate for homes over $450,000.

To claim the rebate, you (the purchaser of the home) must include Form GST190 and file it with your personal income tax.

To ensure you’re making a well-informed decision when it comes to the purchase of your new home, consider enlisting the services of an accounting firm or a firm that specializes in securing HST rebates on new homes.

GST/HST when building

The general rule, if you’re building or significantly renovating a home and will be using it as your primary residence, you’re not a builder for GST or HST purposes. However, if you’re building for business purposes, like building a home to sell it, you are building for tax purposes.

Because there is grey area regarding this, including what constitutes a “significant renovation,” it’s best to consult with a real estate or tax lawyer to determine the specifics of your build.

PST on CMHC Insurance

If you’re buying a home with a down payment of less than 20%, you already know that you need to purchase mortgage default insurance, also called CMHC insurance. In Manitoba, Ontario, and Quebec, you must also pay provincial sales tax (PST) on the default insurance premium—7%, 8%, and 9.975% respectively.


If your CMHC premium amounts to $5,400, the amount of PST you would have to pay on that in Ontario (8% PST) would be:

$5,400 x 8% = $432 PST

It’s important to note that PST on default insurance cannot be added to your mortgage loan – you will have to pay the PST with cash at closing.

Down Payments

A down payment is the sum of money you pay upfront when purchasing a home. It can be shown as a percentage of your total home price, calculated by taking your down payment and dividing it by the dollar amount of your home price.

What is the minimum down payment in Canada?

On homes less than $500,000, 5% is the minimum down payment in Canada.

As of February 15, 2016, the minimum down payment on homes between $500,000 and $1 million is 5% on the first $500,000 and 10% for the portion over $500,000.

Finally, homes over $1 million require a minimum down payment of 20%.

Example: $700,000 home

First $500,000 x 5% down payment = $25,000

Portion over $500K: $200,000 x 10% down payment = $20,000

Total down payment: $25,000 + $20,000 = $45,000


How your down payment affects mortgage default insurance

Mortgage default insurance (or CMHC Insurance) is a mandatory insurance on home purchases with down payments of less than 20%, protecting the lender in case the borrower fails to pay their mortgage payments and defaults on their mortgage.

For more information check out our page on CMHC Insurance.

How your down payment affects your mortgage

1. Your down payment limits the home price you can afford

If you’re purchasing a home under $500,000, the minimum down payment in Canada is 5%, meaning your maximum mortgage affordability is 20x your down payment. Of course in addition to your down payment your lender will also look at your ability to make your mortgage payment each month.

Example: Down payment of $12,000

Total mortgage amount: $12,000 x 20 = $240,000

If your home is $500,000 to $1 million, the minimum down payment is 5% for the portion under $500,000, and 10% for the portion over $500,000.

Example: Down payment of $50,000

First $25,000 x 20 = $500,000

Remaining $25,000 x 10 = $250,000

Total mortgage amount: $500,000 + $250,000 = $750,000

And if your home is over $1 million, the minimum down payment is 20%, meaning your maximum affordability is 5x your down payment.

Example: Down payment of $300,000

Total mortgage amount: $300,000 x 5 = $1,500,000

In addition to your down payment, you will also need to pay land transfer tax, legal fees, and other closing costs, so it would be wise not to use 100% of your savings for your down payment.

2. Your monthly payments decrease the larger your down payment

It may seem straight-forward, but the larger your down payment, the smaller your mortgage, meaning your monthly payments and interest will be reduced.

Where do you get your down payment from?

There are many common sources of funds for down payments:

  • Personal savings
  • Proceeds from selling stocks, bonds, or even personal property
  • Gifts from immediate family

Thank you very much for staying this far to study this guide. Should you need further clarification please reach out to me directly and I will be glad to help further.

Please text me on: 672.998.2220

Reciprocity Logo The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Greater Vancouver REALTORS® (GVR), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the GVR, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the GVR, the FVREB or the CADREB.