What Are Closing Costs?
Closing costs are often overlooked by homebuyers when budgeting for a new property. These costs are in addition to your down payment funds.
Most lenders use a calculation of 1.5% of the purchase price in available funds to satisfy their conditions of financing.
Closing costs include:
- Home Insurance
- Title Insurance
- Legal Fees
- Adjustments paid to the Seller
- Property Transfer Tax
- GST – Government Sales Tax (newly built homes only)
Let’s look at an example to determine total funds need to secure financing. Jon Snow buys a new home for $475,000. He intends to put down 5%.
Down Payment – $23,750 (5%)
Closing Costs – $7,125 (1.5% of purchase price)
Total Funds Needed – $30,875 (to satisfy lender requirements, actual costs vary)
For more detailed look at closing costs, see “6 Closing Costs You Need To Budget For”