What Are Closing Costs?

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”