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Buying A New Home? Here's A Primer About Closing Costs

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One of the most common questions associated with the purchase of a new home is: "How much will it cost, over and above the purchase price, to close my deal?"

Many clients contact our offices to request a quote for a 'legal fee', without realizing that there are other costs associated with closing on a home that are chargeable in addition to legals.  These excess costs are most often considered to be disbursements (expenses), and they are usually paid at closing.

Don't get caught underestimating how much it will cost to complete the purchase of your next home - here is a handy summary to help you navigate the financial.

When consulting with a client about a prospective residential real estate purchase, my usual advice is that, everything else being equal, closing costs will roughly total 2% of the purchase price.  This accounts for a flat legal fee (to work with a lender, prepare legal documents for the purchase and one mortgage, and for a lawyer to meet with the client to review and explain each document prior to signature), including the HST.  This figure also incorporates an estimate for standard disbursements.  Standard disbursements include, ordered from most expensive to least:

  • The provincial land transfer tax (approximately 1.3% of the purchase price, depending on the purchase price);
  • The cost to order a title search; and
  • The cost to purchase a policy of residential title insurance.

This estimate is a ballpark figure, and it may need to be tweaked given the complexity of a given transaction.  However, an essential point to remember is that a lawyer's 'legal fee' to close a transaction is only part of the financial story.  When asking for a real estate quote, be sure to ask about prospective disbursements, and how much they will cost.  Question whether or not the land transfer tax has been accounted for - and, if you are a first time purchaser, be sure that the land transfer tax rebate for new owners has been incorporated.

For more information about your next residential deal, and all of your other real estate legal needs, please contact Eli Udell at 613-563-6683 or by email at [email protected] or Noah Potechin at 613-563-6692 or by email at [email protected].

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Merovitz Potechin LLP
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Ottawa, ON K1Z 8R1

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