Closing Costs: A First Time Home Buyer’s Guide

Handing first-time buyers the keys to their new home is one of the everyday joys of being a real estate lawyer. There’s a good reason they show this moment in the movies and TV commercials: it’s a fun and exciting milestone, and we are proud to be part of it. Unfortunately, the hours we spend on careful calculations and paperwork prior to this moment do not make for thrilling television, and too many new homeowners find themselves caught unawares when it comes to the legal expenses due on closing day.

What follows is a general overview of the most common expenses first-time homeowners should expect, while keeping in mind that individual experiences will vary depending on factors such as the sort of home purchased and where it is located.

Administrative Searches

Before your home purchase is completed, your lawyer will perform a series of administrative searches to ensure that you receive good title to your new home. A ‘title search’ ensures there are no liens or other issues preventing the owner from selling the home.

Title Insurance

While generally effective, administrative searches are not exhaustive, and homeowners are strongly recommended to purchase title insurance to protect themselves against more unusual issues such as real estate title fraud, survey errors, and other potentially expensive hassles. Title insurance premiums typically range from $250-$500.

Taxes

Land Transfer Tax is charged by the Provincial government and is based on the purchase price of the home. First-time homebuyers purchasing an eligible home are entitled to a rebate of up to $4,000.00.

Legal Fees and Disbursements

Legal fees (what the lawyer is paid) will vary based on the conditions of each transaction. Legal fees are separate from the title search costs, insurance premiums, and taxes already mentioned. All of these items, as well as any other applicable fees or disbursements should be reviewed by the lawyer and client(s) prior to the closing of the deal.

There’s no doubt about it: a first home is a huge investment for most of us. Though legal fees and expenses may seem daunting when you are working hard to save up the down payment on your home, budgeting for and understanding these costs in advance is truly the key to the thrilling, as-seen-on-TV closing day experience you’ve been dreaming of.