What Are Closing Costs?


You've found your dream home, the seller has accepted your offer, your loan has been approved and you're eager to move into your new home.

But before you get the key, there's one more step called the closing. Also called the settlement, the closing is the process of passing ownership of a property from the seller to the buyer.

As a buyer, you will sign what seems like endless piles of documents and will have to present a sizable check for the down payment and various closing costs.

Many of the fees may vary by locality, here are some common fees:

  1. Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.
  2. Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.
  3. Loan Origination Fee: This fee covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.
  4. Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.
  5. Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation, and other miscellaneous title fees.
  6. PMI Premium: If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.
  7. Prepaid Interest Fee: This fee covers the interest payment from the date you purchase the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.
  8. Lawyer Fees: The lawyer fees for real estate transactions typically include a combination of flat fees and disbursements. The flat fee covers the lawyer’s professional services, such as preparing and reviewing documents, conducting title searches, and facilitating the closing process. Disbursements are additional costs incurred on behalf of the client, such as land title registration fees, title insurance, and courier charges.
  9. Recording Fees and transfer taxes: This expense is charged by most provinces for recording the purchase documents and transferring ownership of the property.

Make sure you consult a real estate professional in your area to find out which fees--and how much--you will be expected to pay during the closing of you prospective home. Keep in mind that you can negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all of the settlement costs.

If you have questions or are ready to begin the home buying process, just complete the form below, and a member of our team will be in touch shortly!

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