The Closing Costs Buyers Forget to Budget For

Ask a first-time buyer what they need for closing day, and most will say "the down payment." That's necessary, but it's rarely the whole number. A realistic closing budget includes a second layer of costs that are smaller individually but add up to a real amount — often overlooked until a lawyer's trust ledger spells it out a week before possession.

What's typically in that second layer

• Legal fees and disbursements — your real estate lawyer's fee, plus costs like title searches and registration
• Land transfer tax — see the land transfer tax breakdown for how this is calculated
• Title insurance — protects against issues with the property's legal title that a search might miss
• Home inspection fee — paid before firm, not at closing, but worth including in the same mental budget
• Property tax and utility adjustments — reimbursing the seller for amounts they've prepaid past the closing date
• Appraisal fee — sometimes required by the lender, sometimes covered by them
• Moving costs — easy to forget until the truck is booked

A rough rule of thumb

Many buyers budget somewhere in the range of 1.5%–4% of the purchase price for closing costs, with the wide range mostly explained by whether the property is inside Toronto (municipal land transfer tax pushes the number up) and how complex the legal file is. It's a starting point for planning, not a number to rely on for an actual transaction — run your specific numbers with the closing cost calculator and confirm with your lawyer once you have a firm deal.

Why this belongs in the pre-approval conversation

Closing costs come out of cash on hand, not the mortgage. A buyer who's stretched their down payment to the maximum can end up short on closing costs even with a fully approved mortgage in place — which is exactly the kind of thing a mortgage conversation should catch before you're shopping, not after you've written an offer.