What are my closing costs expected to be and how are these determined? Is this my “down payment”?

The good news for the buyer is that the seller is responsible to pay the real estate commissions. The bad news for the buyer is that unless the buyer has an exemption, the buyer must pay property transfer tax and other costs at closing. These amounts are in addition to the purchase price. Typical other closings costs include legal fees, title insurance, adjustment amounts for property taxes/strata fees/utilities or other fees associated with the property but properly split between buyer and seller. These amounts can add up quickly. Information on the amount of property transfer tax payable is found elsewhere on this website, but a good rule of thumb is to budget for $1500-2500 in closing costs in addition to property transfer tax. If the buyer is buying a bare lot or a newly constructed home, the buyer must pay the applicable GST on top of the purchase price, at closing.

The proper way to determine the amount of your down payment is to exclude the closing costs. The buyer’s down payment is normally the purchase price minus any amount financed under a mortgage. The key difference to understand is that the closing costs are in addition to the purchase price and must be paid on or before the completion date. Buyers should budget that in and not rely on the simple math of purchase price minus mortgage amount to ensure that they have enough funds to complete. Failure to do that will, and has, resulted in some very last minute scrambling to locate closing funds, with the possibility of extending the closing date if these funds cannot be easily procured.

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